IN RE: (2026)

Chapter 13

ORDER DISMISSING CASE

The Housing Authority for the City of Augusta, Georgia (“Plaintiff”) initiated this action against Allison Monique Harley (“Defendant”) by filing this action under 11 U.S.C. § 523(a)(2), seeking to except from discharge a debt owed to Plaintiff.¹ The Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1334 and the matter is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(J). The Court may issue a final order.

I.

At present, Defendant is a debtor in a chapter 13 proceeding.² In the underlying case, Defendant is paying unsecured creditors one hundred percent of allowed claims with interest of nine percent. Plaintiff is not partaking in the distribution because it failed to timely file a proof of claim. This action was filed on the last day to oppose dischargeability.³

The Complaint was filed on September 22, 2025, and the Clerk of Court issued a summons on September 23, 2025. Plaintiff failed to timely serve the summons. The Court then issued a Rule to Show Cause for Plaintiff to show cause as to why this case should not be dismissed for failure to prosecute. Plaintiff appeared through counsel at the Rule to Show Cause hearing. The Court dissolved the Rule to Show Cause on Plaintiff's assurance to promptly seek a reissued summons and properly serve the Defendant.⁴

Two weeks later, Plaintiff sought a reissued summons; it was issued on December 5, 2025. A certificate of service of the reissued summons was not timely filed. SC LBR 9013-3(b) (requiring a certificate of service to be filed within seven days of matters delegated to a party). Plaintiff filed a certificate of service on January 7, 2026, indicating service on December 5, 2025, by regular mail at the address listed in Defendant's petition; however, the certificate of service misstates Defendant's name in both the mailing address and the caption.⁵ Defendant failed to file an answer.

It appears from the Complaint that Plaintiff obtained a pre-petition judgment against Defendant. Plaintiff alleges the following:

a. Plaintiff obtained a judgment against Defendant in the amount of $11,519.00 with a statutory interest rate of seven-percent on April 22, 2022;

b. Between September 1, 2019, and September 21, 2021, Defendant was a client/tenant of Plaintiff;

c. Pursuant to the terms of the agreement with Plaintiff, Defendant was required to report all household income;

d. Based on amounts disclosed, Defendant was charged less rent than she would have been charged if she accurately reported her income;

e. Defendant's representations were incomplete, incorrect, and made without regard for the truth so Defendant could induce Plaintiff to charge lower monthly rental rates; and

f. Because of these false representations by Defendant, made with intent to mislead Plaintiff, the debt owed to Plaintiff should be excepted from discharge pursuant to 11 U.S.C. § 523(a)(2).6

After serving the summons and Complaint, Plaintiff failed to seek a default. The Court set a status hearing and offered Plaintiff's counsel the opportunity to attend remotely.⁷ Plaintiff's counsel failed to attend. The Court thereafter issued a Rule to Show Cause ordering Plaintiff's counsel to appear and show cause why this case should not be dismissed for failure to prosecute.⁸ The Rule to Show Cause prompted Plaintiff to seek an entry of default judgment ⁹ and to move for a default judgment.¹⁰ Plaintiff's counsel attended the Rule to Show Cause hearing and the Court dissolved the Rule to Show Cause.¹¹

II.

The matter before the Court is Defendant's default and Plaintiff's Motion for Entry of Default Judgment. Although Defendant is in default, the Court accepts only well-pled facts as true and must determine whether those facts state a plausible claim before entering default judgment. See Ashcroft v. Iqbal, 556 U.S. 662 (2009), Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007). Conclusory assertions are insufficient. Baltimore Line Handling Co. v. Brophy, 771 F.Supp.2d 531, 544 (D.Md. 2011) (holding “[a]lthough no opinion of the Fourth Circuit has yet applied the Iqbal/Twombly pleading standard in the context of default judgment, several recent unreported district court opinions, including two within this circuit, have found Iqbal relevant to the default judgment inquiry”).

Under 11 U.S.C. § 523(a)(2), a creditor may seek an exception to discharge for “money, property, services, or an extension, renewal, or refinancing of credit” if the debtor obtained the benefit under “false pretenses, a false representation, or actual fraud,” or if a debtor makes a statement in writing which (1) is materially false, (2) speaks to the debtor's financial condition, (3) induced the creditor's reasonable reliance, and (4) the debtor intended to deceive the creditor. 11 U.S.C. § 523(a)(2). Because plaintiffs seeking section 523(a)(2)’s protection must plead fraud, Federal Rule of Civil Procedure 9(b)’s heightened pleading requirement applies as incorporated by Rule 7009 of the Federal Rules of Bankruptcy Procedure. See Fed. R. Bankr. P. 7009; Fed. R. Civ. P. 9(b); 11 U.S.C. § 523(a)(2), Anderson v. Found. for Advancement, Educ. & Emp. of Am. Indians, 155 F.3d 500, 506 (4th Cir. 1998).

Under Rule 9(b), a plaintiff who alleges fraud must identify “the time, place, and contents of the false representations, as well as the identity of the person making the misrepresentation and what he or she obtained thereby.” MSP Recovery Claims, Series LLC v. Lundbeck LLC, 130 F.4th 91, 106 (4th Cir. 2025) (citing Edmonson v. Eagle Nat'l Bank, 922 F.3d 535, 553 (4th Cir. 2019)). See e.g., Progressive N. Ins. Co. v. Mitchell, No. 9:20-cv-673-BHH, 2021 WL 914456, at *3 (D.S.C. Mar. 10, 2021) (concluding the purpose of Rule 9(b) is to provide notice to the defendant, prevent frivolous lawsuits, eliminate fraud actions after discovery ends, and protect the defendant's reputation). The heightened pleading standard applies even in the default judgment context. James v. Delta Motors, LLC, 672 F.Supp.3d 155, 163 (W.D. Va. 2023). Whether brought under § 523(a)(2)(A) or (B), Plaintiff must plead, with particularity: the who, what, when, where, and how of the misrepresentation; intent to deceive; the applicable reliance standard (i.e. justifiable under subsection (A), reasonable under subsection (B)); and proximate loss. A court should hesitate to dismiss a claim under Rule 9(b) if the court is satisfied that (1) the defendant has been made aware of the circumstances that he or she will need to defend at trial, and (2) that the plaintiff has substantial pre-discovery evidence of the alleged fraud. Edmonson, 922 F.3d at 553.

In MSP Recovery Claims, Series LLC, the Fourth Circuit, in dicta, concluded that the plaintiffs’ complaint, which did not contain alleged specific false statements, the defendants’ specific intent behind the alleged statements, or the kickbacks defendants received from the false statements, likely did not meet the pleading standard requirements under Rule 9(b). MSP Recovery Claims, Series LLC, 130 F.4th at 105–6. In contrast, the United States District Court for the District of South Carolina in Progressive Northern Insurance Company v. Mitchell held a plaintiff met Rule 9(b)’s heightened pleading requirement by including the specific date a staged car accident occurred, that defendants conspired to collect money from the nonexistent accident, and that the defendants knowingly provided the false information to plaintiff. Progressive N. Ins. Co. 2021 WL 914456, at *5.

III.

Here, Plaintiff's Complaint consists almost entirely of conclusory assertions and it fails to contain specific information that meets the heightened pleading requirement. See Compl. ECF No. 1, ¶ 3 (stating “The representations made by the Debtor-Defendant to the Plaintiff were incomplete and incorrect”). Plaintiff's statements, accepted as true, fail to include essential details to prove a fraud case, including when Defendant made the alleged false statements, what specific alleged false statement were made, and any specific details showing that a discrepancy exists. See id. at ¶ 3–4.

For instance, Plaintiff did not disclose how much it would have charged Defendant had it known her full income. See id. Plaintiff alleges that statements were made in writing but does not attach or quote pertinent provisions of any document or otherwise specifically describe the content of the misrepresentation. If Plaintiff contends the alleged misstatements were ‘respecting the debtor's financial condition,’ it must identify the specific written statements, their contents, dates, and the signatory, and plead facts showing material falsity and reasonable reliance. None are alleged.

Plaintiff pleads no facts showing actual reliance, much less justifiable or reasonable reliance, and provides no causal link between any alleged misrepresentation and the extension of a benefit, as required by § 523(a)(2). Moreover, Plaintiff never relates the pre-petition judgment to the false statements. The Court cannot determine from the face of the Complaint whether all of the judgment or only some portion was the result of Defendant's alleged false statements. Plaintiff pled no facts establishing that the state-court judgment was entered on fraud grounds or allocating any portion of that judgment to losses proximately caused by the alleged misrepresentations. Without such allegations, nondischargeability cannot be inferred. Thus, Plaintiff's Complaint is insufficient under Rule 9(b)’s pleading standard. See Fed. R. Civ. P. 9(b).

IV.

The procedural history underscores the absence of a diligently pursued claim. Plaintiff, for whatever reason, failed to file a proof of claim in this case. Perhaps to overcome this missed opportunity, it commenced this adversary proceeding, at the last minute, to deny Defendant a fresh start based on what appears to amount to missteps in Defendant's paperwork. Yet, Plaintiff has failed to attend a hearing and otherwise prosecute this case without prompting from the Court on three occasions. Nonetheless, the outcome here is dictated by the application of governing law, not equitable considerations.

Plaintiff's Complaint is not well pled and therefore fails to state a claim. Plaintiff's Motion for Default Judgment is denied. This adversary complaint is dismissed pursuant to Fed. R. Civ. P. 12(b)(6), without prejudice, for failure to plead fraud with particularity under Fed. R. Civ. P. 9(b). The Plaintiff is granted limited leave to file an amended complaint curing the deficiencies identified herein and complying with Fed. R. Civ. P. 9(b) on or before 5:00 pm on April 24, 2026. If such an amended complaint is filed, Plaintiff must request a reissued summons within two days of amending the complaint. Plaintiff must serve the amended complaint and reissued summons in strict compliance with Fed. R. Bankr. P. 7004 and file a certificate of service within seven days of the reissued summons, consistent with SC LBR 9013-3(b). If Plaintiff fails to timely file an amended complaint, timely request the reissued summons, timely serve and file evidence of service, or otherwise strictly comply with this Order, the dismissal shall be converted to a dismissal with prejudice without further notice.

AND IT IS SO ORDERED.

FOOTNOTES

1.   ECF No. 1 (“Complaint”)

2.   C/A 25-02176-JD.

3.   Defendant received notice of the bankruptcy case and the deadline to file a proof of claim. ECF No. 2, C/A 25-02176-JD.

4.   ECF No. 8.

5.   ECF No. 13. This may be an independent ground to deny Plaintiff relief but the focus of this order is Plaintiff's failure to properly plead the action.

6.   Plaintiff does not state whether it is relying on § 523(a)(2)(A) or (B). The Court assumes Plaintiff is relying on § 523(a)(2)(B) because of the reference to a written statement by the Defendant but the result of this Order would not change if Plaintiff's action was based on § 523(a)(2)(A).

7.   ECF No. 14.

8.   ECF No. 17.

9.   ECF No. 26.

10.   ECF No. 28.

11.   ECF No. 32