Published in the Friday, January 19, 2001 edition of The Legal Intelligencer
When the stock market rises, there are no problems. But when the stock market declines, issues concerning margin calls become relevant.
In an unpublished report from the United States Court of Appeals for the Fourth Circuit, the Court dealt with the issue of whether a Chapter 7 debtor, who has incurred a debt of $321,000 for a margin call, can discharge the obligation.
In the matter of Lind-Waldock & Company, an Illinois corporation v. Catherine P. Morehead; Raymond A. Morehead, decided on January 3, 2001, the Court of Appeals affirmed the decision of the United States District Court for the Northern District of West Virginia and denied the broker’s objection to discharge. The debtors opened a brokerage account in 1995 with an initial deposit of $370,000. The application required the Moreheads (debtors) to inform the brokerage firm of any material change to the provided information.
