In the bankruptcy case of Roe, Paul E. and Tara L.; In re, the debtor was denied a bankruptcy discharge of $35,000 of debt because of unjust enrichment.
The details of the bankruptcy case:
“The debtor had a relationship with the plaintiff since childhood. The plaintiff was 48 years old, had an IQ of 56 and the mental capacity of a six year old according to a clinical psychologist. Because of this, the plaintiff was not able to perceive deception which created an environment where the debtor could unjustly enrich herself at his expense. When the plaintiff’s mother was no longer able to care for the plaintiff, the debtor became his Social Security representative payee.
For approximately six years, she helped him manage his Social Security benefits and pay his bills. After the plaintiff was injured in an automobile accident, he moved in with the debtors. A few months later, he allegedly suggested that he transfer his home to the debtor. The debtor claims that she tried to talk him out of it, but he insisted, so she arranged for a lawyer to draw up the papers transferring title to the home to the debtor for $1. Shortly after acquiring title to the property, the debtor took out a $48,000 mortgage against the property, fixed it up, and rented it out. She then listed it for sale for $124,000. A few months after the property was transferred, the plaintiff left the debtor’s home, moved in with his brother, and sued the debtor to recover his home. The plaintiff ultimately obtained a state court judgment against the debtor for $35,000 based on unjust enrichment.”
The debtor filed for bankruptcy; but the bankruptcy court ruled that the judgment could not be discharged in bankruptcy because the debtor intentionally failed to explain to the plaintiff that he could sell the property and use the proceeds to supplement his own income. Furthermore, because of the plaintiff’s disability he depended on the debtor to be honest and transparent in her dealings which she failed to do, which in turn caused him to lose his home. In essence, the bankruptcy court refused to discharge the judgment because the debtor knew of the plaintiff’s disability and took advantage of it of personal gain.