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Be Careful When Loaning Money to Someone You Meet on Match.Com!

Be Careful When Loaning Money to Someone You Meet on Match.Com!


A recent opinion (Murray v. Hanley) from Judge Dunn of the Oregon Bankruptcy Court is a good illustration of why it may not be a good idea to loan substantial amounts of money to someone you meet online.  In that case, Ms. Murray met Mr. Hanley through Match.Com a few years after divorcing her husband of 33 years.  Mr. Hanley’s online profile listed his occupation as a “semi-retired securities trader”.  At the time they met, Ms. Murray lived in Idaho, and Mr. Hanley lived in Arizona.  About one year later, he moved into her Idaho home.

Although the parties never married, they did hold a “commitment ceremony” a couple of years later.  Shortly thereafter, they bought a house together; Ms. Murray paid 75% of the purchase price, and Mr. Hanley paid the remaining 25%.  About six months later, Ms. Murray bought out Mr. Hanley’s interest in the home as he could not afford his share of upkeep and maintenance expenses in light of losses incurred in securities trading.

A couple of years later, Mr. Hanley asked Ms. Murray for a loan of $100,000 because of the investment losses.  He wanted to pool the loan proceeds with $100,000 of his own money for further investment, and assured Ms. Murray that the loan would be “’risk free’, absolutely safe”, and that he would take “baby steps” in investing the money cautiously.  He also executed a promissory note in favor of Ms. Murray, and promised to repay the loan, with interest at 6%, within one year.

Within months, Mr. Hanley informed Ms. Murray that he lost of all of the money.  Not surprisingly, an argument ensued, and Ms. Murray terminated her relationship with Ms. Hanley, and asked him to leave her home.  Subsequent investigation revealed that Mr. Hanley’s investments were far from cautious, and centered on day trading.

Despite the fact that Ms. Murray later sent Mr. Hanley a Valentine’s Day card stating that she would never take legal action to collect the debt, she sued him in Idaho state court.  Shortly thereafter, Mr. Hanley filed for bankruptcy.  Ms. Murray objected to the discharge of the debt, claiming (among other things) that the debt was incurred by fraud – meaning that Ms. Murray would not have loaned the money but for Mr. Hanley’s representations to her prior to obtaining the loan.

Judge Dunn declared the debt owing non-dischargeable, holding that Mr. Hanley fraudulently induced Ms. Murray into making the loan:

“I find that Mr. Hanley knew that Ms. Murray was risk averse and induced her to make the loan by promising that he would invest the money conservatively to provide her with a 6% return. However, when he made the representation that he would invest Ms. Murray’s funds conservatively, he fully intended to, and did, use the loan funds to continue his high-risk day trading. I find that Mr. Hanley knew that if he had told Ms. Murray that he was going to use the $100,000 Loan for day trading, she would not have loaned him the money. I find that Ms. Murray justifiably relied on Mr. Hanley’s representation that he would invest the loan funds conservatively because of their personal relationship. He had given her some sound financial advice before, and she had no reason not to trust him. Finally, the $100,000 Loan money was lost in a period of approximately three months or less because Mr. Hanley used it to fuel his day trading losses. I find that Ms. Murray suffered damages as a proximate result of her having loaned her money to Mr. Hanley based on his false representation as to how the money would be invested.”

Despite the fact that the debt was declared non-dischargeable, it is unclear as to whether or not Ms. Murray will be able to effectively collect the amounts owing from Mr. Hanley.  As noted in one of our other blog posts, certain assets are exempt from execution.  If Mr. Hanley does not have any non-exempt assets, Judge Dunn’s ruling holding the debt non-dischargeable may be a hollow victory for Ms. Murray.

This case is one example of where the court can declare a debt non-dischargeable, and provides some important lessons.  First, it is rarely a good idea to lend money to family or friends.  Aside from the destruction of personal relationships which can result when financial deals turn sour, collecting from friends or family members can be difficult at best.  Secondly, it illustrates the necessity of taking quick action if you are the one owed the debt, and the one owing the debt files for bankruptcy.  If you feel that an objection to discharge based on fraud or other grounds is appropriate, you should seek legal advice immediately, as a complaint objecting to discharge must be filed with the court within sixty days after the creditors’ meeting, or the debt may be considered discharged anyway (even if a dischargeability challenge would have been successful).

This post is intended to be purely informational in nature, and cannot be considered legal advice.  If you have questions related to the discharge of debts in bankruptcy, please call our office at (503) 545-1061 (Oregon cases) or (360) 836-4238 (Washington cases) to schedule a free initial consultation.

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