                           UNPUBLISHED

UNITED STATES COURT OF APPEALS
                 FOR THE FOURTH CIRCUIT


LIND-WALDOCK & COMPANY, an                
Illinois corporation,
                   Plaintiff-Appellant,
                  v.                             No. 00-1114
CATHERINE P. MOREHEAD; RAYMOND
A. MOREHEAD,
             Defendants-Appellees.
                                          
            Appeal from the United States District Court
     for the Northern District of West Virginia, at Clarksburg.
                  Irene M. Keeley, District Judge.
             (CA-98-125-1, BK-97-1103, BK-97-11497)

                       Argued: November 1, 2000

                       Decided: January 3, 2001

       Before MICHAEL, MOTZ, and KING, Circuit Judges.



Affirmed by unpublished per curiam opinion.


                              COUNSEL

ARGUED: Henry Buswell Roberts, Jr., NATHAN & ROBERTS,
Toledo, Ohio, for Appellant. Thomas Herbert Fluharty, Clarksburg,
West Virginia, for Appellees. ON BRIEF: W. David Arnold,
NATHAN & ROBERTS, Toledo, Ohio; Evans L. King, Jr., Donald
Epperly, STEPTOE & JOHNSON, Clarksburg, West Virginia, for
Appellant.
2              LIND-WALDOCK & COMPANY v. MOREHEAD
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).


                              OPINION

PER CURIAM:

   Lind-Waldock & Company brought an adversary proceeding
against Chapter 7 debtors Raymond and Catherine Morehead, seeking
to declare a margin debt nondischargeable under the fraud exceptions
to discharge found in 11 U.S.C. §§ 523(a)(2)(A) & (C). After a bench
trial the bankruptcy court dismissed Lind-Waldock’s § 523(a)(2)(A)
claim on the grounds that the company did not establish the existence
of a representation known to be false when made, an intent to defraud,
or justifiable reliance. In addition, the court dismissed the
§ 523(a)(2)(C) claim because it concluded that the margin debt was
not a "consumer debt." The district court affirmed. We affirm as to
§ 523(a)(2)(A) because the bankruptcy court was not clearly errone-
ous in finding that the Moreheads did not intend to defraud Lind-
Waldock. We also affirm as to § 523(a)(2)(C) because the debt is not
a "consumer debt."

                                   I.

   Raymond Morehead first opened a trading account with Lind-
Waldock, a futures clearing merchant, in 1989. Raymond used the
account to speculate in the financial futures market by buying and
selling S&P 500 contracts. An S&P 500 contract is an agreement to
buy or to sell the value of the S&P 500 index at an agreed price at
a future settlement date. Speculating in the futures market carries high
risk.

   Raymond opened his account with a deposit of $50,000. Thereaf-
ter, he lost between $50,000 and $100,000 and closed the account in
1991. In 1995 Raymond’s wife, Catherine, opened a new account
with Lind-Waldock. Catherine opened the account in her name for
estate tax purposes, and Raymond managed the account. In opening
the new account, the Moreheads completed an account application.
               LIND-WALDOCK & COMPANY v. MOREHEAD                     3
They stated truthfully on the application that their net worth exclusive
of equity in their home was "more than $1,000,000." The application
also provided that the Moreheads were to inform Lind-Waldock of
any changes to the information provided.

   The Moreheads opened the 1995 account with a $370,000 deposit.
Within a year Raymond had lost the entire $370,000, and the account
balance was zero. Nevertheless, Raymond kept the account open, but
he did not trade. In February 1997 Raymond obtained an unsecured
$50,000 bank loan, which he deposited into the account. By the time
of this deposit, the Moreheads’ net worth was significantly less than
$1,000,000. Indeed, excluding the equity in their home, the More-
heads had only $20,000 in assets. The Moreheads never informed
Lind-Waldock about the drastic reduction in their net worth, and
Lind-Waldock never inquired about the Moreheads’ financial status.

   On April 10, 1997, Raymond began trading with the $50,000, and
he made substantial gains. His gains were swift in the short run, and
by April 29 his liquidation position was over $470,000. Raymond
then began to sustain big losses. Within a two-day period he lost
almost $100,000, and on the third day he lost over $230,000. By May
7 his position dropped to $51,000. On May 8 he recovered somewhat,
gaining over $100,000. But on May 9 the roof caved in: Raymond lost
$479,000, and Lind-Waldock made a margin call to the Moreheads in
the amount of $850,000. Raymond immediately agreed to wire the
money and later in the day claimed that he had wired it. In fact, Ray-
mond had not wired the money because the Moreheads could not
cover the call. The account ended up with a negative balance of
approximately $321,000.

   The Moreheads promptly filed for Chapter 7 bankruptcy. Lind-
Waldock filed an adversary proceeding against the Moreheads, seek-
ing to have the bankruptcy court declare the $321,000 debt nondis-
chargeable. Lind-Waldock argued that the debt was nondischargeable
under 11 U.S.C. §§ 523(a)(2)(A) & (C). After a bench trial the bank-
ruptcy court dismissed the complaint, concluding (1) that as to
§ 523(a)(2)(A) there was no representation known to be false when
made, no justifiable reliance, and no intent to defraud and (2) that as
to § 523(a)(2)(C) the debt was not a "consumer debt." The district
court affirmed, and Lind-Waldock appeals.
4              LIND-WALDOCK & COMPANY v. MOREHEAD
                                   II.

   In bankruptcy cases we review de novo the decision of the district
court, "effectively standing in its place to review directly the findings
of fact and conclusions of law made by the bankruptcy court." Butler
v. David Shaw, Inc., 72 F.3d 437, 440 (4th Cir. 1996). We may not
set aside findings of fact unless they are "clearly erroneous, and due
regard shall be given to the opportunity of the bankruptcy court to
judge the credibility of the witnesses." Fed. R. Bankr. P. 8013. The
creditor bears the burden of proving that a debt is nondischargeable
by a preponderance of the evidence. See Grogan v. Garner, 498 U.S.
279, 287 (1991).

                                   A.

   Section 523(a)(2)(A) provides that a debt is nondischargeable if it
arose from "false pretenses, a false representation, or actual fraud,
other than a statement respecting the debtor’s . . . financial condition."
A creditor must establish five elements under this section: (1) that the
debtor made a representation; (2) that at the time the representation
was made, the debtor knew it was false; (3) that the debtor made the
false representation with the intention of defrauding the creditor; (4)
that the creditor justifiably relied upon the representation; and (5) that
the creditor was damaged as the proximate result of the false repre-
sentation. See Foley & Lardner v. Biondo (In re Biondo), 180 F.3d
126, 134 (4th Cir. 1999); MBNA Am. v. Simos (In re Simos), 120 B.R.
188, 191 (Bankr. M.D.N.C. 1997).

   In reviewing the bankruptcy court’s dismissal of Lind-Waldock’s
§ 523(a)(2)(A) claim, we look first at the court’s finding that the
Moreheads did not intend to defraud Lind-Waldock. As we have
already indicated, we review this finding under the clearly erroneous
standard. See Candland v. Ins. Co. of N. Am. (In re Candland), 90
F.3d 1466, 1469 (9th Cir. 1996); cf. Ford v. Poston (In re Ford), 773
F.2d 52, 55 (4th Cir. 1985) (holding that clearly erroneous standard
applies to whether there was fraudulent intent under the Bankruptcy
Code’s fraudulent transfer provision). In determining whether a
debtor possessed fraudulent intent, the question is whether the debtor
subjectively intended to defraud the creditor. See Rembert v. AT&T
Universal Card Servs., Inc. (In re Rembert), 141 F.3d 277, 281 (6th
               LIND-WALDOCK & COMPANY v. MOREHEAD                     5
Cir. 1998), cert. denied, 525 U.S. 978 (1998); Citibank (S.D.), N.A.
v. Eashai (In re Eashai), 87 F.3d 1082, 1090 (9th Cir. 1996); see also
Field v. Mans, 516 U.S. 59, 69 (1995) (concluding that elements of
§ 523(a)(2) incorporate the general common law of torts). A debtor
subjectively intends to defraud a creditor when he in bad faith incurs
a debt with the knowledge that the debt is unlikely to be repaid. See
Rembert, 141 F.3d at 281. A debtor does not subjectively intend to
defraud a creditor simply because he should know that he lacks the
ability to repay a debt when it is incurred. See id. While the debtor’s
inability to repay a debt when it is incurred may be a factor in proving
subjective intent, "the hopeless state of a debtor’s financial condition
should never become a substitute for an actual finding of bad faith."
Anastas v. Am. Sav. Bank (In re Anastas), 94 F.3d 1280, 1286 (9th
Cir. 1996).

   Lind-Waldock argues that the Moreheads intended to commit fraud
by trading when they knew that their net worth was insufficient to
cover their position. The bankruptcy court disagreed. At trial Ray-
mond repeatedly testified that he never considered the prospect that
his account balance might drop below zero. He stated that he never
had a negative balance before and that he "felt like [he] had a pretty
good idea where the market was going." The bankruptcy court cred-
ited Raymond’s testimony, and we must give that court deference
because it had the "unique ability" to assess his credibility. Biondo,
180 F.3d at 134. There was evidence in addition to Raymond’s testi-
mony that supports the bankruptcy court’s finding that the Moreheads
did not intend to commit fraud. Specifically, the time period between
when the Moreheads had a positive account balance and when they
went under with the $321,000 deficit was extremely short — a matter
of hours. At the close of the market on May 8 the Moreheads’ account
had a liquidation value of over $158,000. By 10:00 a.m. the next day
the liquidation value was negative $321,000. The very short time that
the Moreheads had to consider how to handle the growing deficit is
evidence that the Moreheads did not formulate an intent to defraud
Lind-Waldock. This is a close case to be sure, but we must conclude
that the bankruptcy court was not clearly erroneous in finding that the
Moreheads did not intend to defraud Lind-Waldock. Because Lind-
Waldock did not prove intent to defraud as required under
§ 523(a)(2)(a), we can affirm the dismissal on that basis alone. As a
6              LIND-WALDOCK & COMPANY v. MOREHEAD
result, we need not consider the bankruptcy court’s determinations
with respect to other elements of the § 523(a)(2)(A) claim.*

                                   B.

   Section § 523(a)(2)(C) provides that "consumer debts . . . for lux-
ury goods or services" incurred within 60 days of filing for bank-
ruptcy are presumed to have been obtained through fraud. Lind-
Waldock argues that this section applies to the Moreheads’ debt. It
does not. A consumer debt is one incurred "by an individual primarily
for a personal, family, or household purpose." 11 U.S.C. § 101(8). A
debt incurred with a profit motive is not incurred "primarily for a per-
sonal, family, or household purpose" and therefore is not a consumer
debt. See Runski v. Cypher Chiropractic Ctr. (In re Runski), 102 F.3d
744, 747 (4th Cir. 1996) ("[C]ourts have concluded uniformly that
debt incurred for a business venture or with a profit motive does not
fall into the category of debt incurred for ‘personal, family, or house-
hold purposes.’"). The Moreheads incurred the debt while speculating
in the futures market. The debt is therefore not a consumer debt. See
Burns v. Citizens Nat’l Bank (In re Burns), 894 F.2d 361, 363 (10th
Cir. 1990) (holding that a loan to invest in the stock market is not a
consumer debt).

                                   III.

   In conclusion, we affirm as to § 523(a)(2)(A) because the bank-
ruptcy court was not clearly erroneous in concluding that the More-
heads did not intend to defraud Lind-Waldock. Moreover, we affirm
as to § 523(a)(2)(C) because the debt is not a consumer debt. The
judgment is affirmed.

                                                             AFFIRMED

   *Lind-Waldock also argues that the Moreheads intended to commit
fraud when Raymond lied about wiring the money in response to the
margin call. However, Lind-Waldock does not challenge the bankruptcy
court’s conclusion that it suffered no additional damage after Raymond
lied. Therefore, even if the lie constituted fraud, Lind-Waldock could not
recover.
