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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

WESTERN DIVISION

Timothy Cosman, 

 Appellant, 

 v. 

Busey Bank

 Appellee.

 Case No. 3:20-cv-50298

 Honorable Iain D. Johnston

 

MEMORANDUM OPINION AND ORDER

Timothy Cosman appeals the Bankruptcy Court’s decision to grant Busey 

Bank’s (“the Bank”) motion for summary judgment as to count II of its adversarial 

complaint. That count sought a declaration that Cosman debts to Busey Bank are 

nondischargeable because he induced the Bank into issuing him the loans by filing 

false financial documents and that the Bank reasonably relied on those falsehoods.

The Court affirms the Bankruptcy Court’s decision.

I. Background

Between 2014 and 2015, Cosman obtained several loans from Busey Bank.1

These loans, including refinances and renewals, totaled millions of dollars. As part 

of these transactions, Cosman filed financial statements claiming that he owned 

twenty percent of Cosman Farms, LLC, which he claimed was valued at $2,000,000; 

twenty percent of Cosman Family Limited Partnership, which he claimed was 

1 The facts are taken entirely from the record presented on appeal, including the affidavits, 

and Cosman’s response to Busey Bank’s statement of material facts. 
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valued at $1,000,000; and an itemized list of farming machinery, equipment, and 

vehicles, which he either overvalued or did not own. In March 2015, he filed another 

financing statement claiming the same, but with a slight increase in the claimed 

value of the two businesses. 

Cosman then defaulted on the Busey Bank loans and, in June 2016, sought 

relief under chapter 7 of the Bankruptcy Code. But the financial information 

Cosman used to obtain those loans was fraudulent. In October 2019, Cosman 

pleaded guilty and was convicted of bank fraud because of his use of fraudulent 

information to obtain the Busey Bank loans. The Bank then filed a four-count 

adversarial complaint in the Bankruptcy Court seeking to declare the loans 

nondischargeable under 11 U.S.C. § 523(a)(2)(A)–(B), (a)(4), and (a)(6). Count II 

asked the Court to declare the loans nondischargeable under § 523(a)(2)(B). The 

Bankruptcy Court granted the Bank’s motion as to that count and dismissed the 

rest. Cosman now appeals. The question on appeal is whether the Bankruptcy 

Court erred in granting summary judgment to the Bank under § 523(a)(2)(B) when

it found no genuine issue of material fact regarding the Bank’s reliance on Cosman’s 

fraudulent financial statements.

II. Analysis

The Court reviews the Bankruptcy Court’s determinations of law de novo,

and its factual findings for clear error. U.S. Bank N.A. v. Vill. at Lakeridge, LLC, 

138 S. Ct. 960, 966 (2018) (noting, in a bankruptcy case, that legal conclusions are 

reviewed de novo); Estate of Cora v. Jarling (In re Jarling), 816 F.3d 921, 924 (7th 
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Cir. 2016); Shaw Steel, Inc. v. Morris (In re Morris), 223 F.3d 548, 552 (7th Cir. 

2000); Fed. R. Civ. P. 52(a)(6); Fed R. Bankr. P. 7052. Summary judgment is 

appropriate when no genuine dispute of material fact exists, and the movant is 

entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). The moving party 

bears the initial burden to show that no genuine dispute of material fact exists. Id.

Then, the nonmovant must present its own evidence showing that a genuine 

dispute of material fact does exist. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 

251 (1986). 

The Court will not engage in a trial on affidavits. Id. at 255 (“The evidence of 

the nonmovant is to be believed, and all justifiable inferences are to be drawn in his 

favor.”). But affidavits or declarations based on personal knowledge may be used to 

support a motion for summary judgment. Fed. R. Civ. P. 56(c)(4). If the nonmovant 

fails to properly address the movant’s assertions of fact, the Court may consider the 

assertions undisputed and grant the motion if these undisputed facts entitle the 

movant to judgment as a matter of law. Fed. R. Civ. P. 56(e)(2)–(3). 

A. Reasonable Reliance

In count II of its adversarial complaint, the Bank contended that its loans to 

Cosman were nondischargeable under 11 U.S.C. § 523(a)(2)(B). It contended 

Cosman had obtained the loans by using fraudulent financial statements on which 

the Bank reasonably relied. In re Cosman, 616 B.R. 358, 368 (Bankr. N.D. Ill. 2020). 

That section of the Bankruptcy Code provides that a bankruptcy discharge order 

does not discharge: 
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an individual debtor from any debt . . . for money, property, services, or 

an extension, renewal, or refinancing of credit, to the extent obtained by 

. . . use of a statement in writing that is (i) materially false; (ii) respecting 

the debtor’s or insider’s financial condition; (iii) on which the creditor to 

whom the debtor is liable for such money, property, services, or credit 

reasonably relied; and (iv) that the debtor caused to be made or 

published with intent to deceive.

11 U.S.C. § 523(a)(2)(B) (emphasis added). To succeed on its motion for summary 

judgment, the Bank must show that Cosman made a materially false written 

statement about his financial condition with the intent to deceive, and that the 

Bank reasonable relied on that written statement. Fischer Inv. Cap., Inc. v. Cohen

(In re Cohen), 507 F.3d 610, 613 (7th Cir. 2007). The Bankruptcy Court granted the 

Bank’s motion for summary judgment on count II. Cosman’s appeal challenges only 

the Bankruptcy Court’s determination that the Bank reasonably relied on his 

fraudulent financial statements. No other element is at issue. Dkt. 14, at 5. 

Section 523 employs two different types of reliance: reasonable and justified. 

Justifiable reliance requires a lesser showing than reasonable reliance. Lamar, 

Archer & Cofrin, LLP v. Appling, 138 S. Ct. 1752, 1763 n.6 (2018). Section 

523(a)(2)’s text “plainly heightens the bar to discharge when the fraud at issue was 

effectuated” through a written financial statement. Id. at 1763. “Under the 

justifiable reliance standard, a creditor has no duty to investigate unless the falsity 

of the representation would have been readily apparent.” Ojeda v. Goldberg, 599 

F.3d 712, 717 (7th Cir. 2010). This presents a subjective inquiry into the 

“circumstances of a particular case and the characteristics of a particular plaintiff.” 

Id.
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In contrast, the reasonable reliance test is objective. Although it is assessed 

on a case-by-case basis, In re Bonnett, 895 F.2d 1155, 1157 (7th Cir. 1989), it does 

not involve an subjective inquiry into the creditors lending policies and practices, In 

re Garman, 643 F.2d 1252, 1256 (7th Cir. 1980). Furthermore, courts do not second 

guess the creditor’s lending decisions. In re Morris, 223 F.3d at 553. Instead, federal 

courts determine whether the creditor’s reliance on the debtor’s fraudulent financial 

statement was reasonable under the circumstances. Field v. Mans, 516 U.S. 59, 63 

(1995) (defining reasonable reliance as “what would be reasonable for a prudent 

man to do under those circumstances”). Although creditors are not generally 

required to conduct investigations into every potential agreement, In re Morris, 223 

F.3d at 554, they cannot blindly ignore evidence of deceit, that to a reasonably 

prudent creditor, would throw up a red flag. In re Bonnett, 895 F.2d at 1157; accord 

Veritex Cmty. Bank v. Osborne (In re Osborne), 951 F.3d 691, 699 (5th Cir. 2020). 

But even though reasonable reliance is a heightened burdened for creditors, it 

“cannot be said to be a rigorous requirement, but rather is directed at creditors 

acting in bad faith.” In re Morris, 223 F.3d at 553 (quoting Bank One, Lexington, 

N.A. v. Woolum, 979 F.2d 71, 76 (6th Cir. 1992)). 

Here, the Bankruptcy Court analyzed the affidavits and the lending 

agreements and found that “[t]here is nothing on the face of the financial 

statements that would have alerted the Bank that the debtor was misrepresenting 

his financial condition or that there was a need for further investigation.” In re 

Cosman, 616 B.R. at 370–71. The Bankruptcy Court analyzed the evidence and 
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determined that no red flags existed. With no red flags, reasonable reliance did not 

require the Bank to investigate further. Cosman contends that this was error. 

Cosman cites to Waugh Real Estate Holdings, LLC v. Daecharkhom (In re 

Daecharkhom), 481 B.R. 641 (Bankr. D. Nev. 2012). Dkt. 14, at 9. But that case is 

not persuasive. First, it is a case from a Ninth Circuit district court. See Camreta v. 

Greene, 563 U.S. 692, 709 n.7 (2011) (district court decisions are not precedential).

Second, and most important, that case seems to suggest that justifiable reliance and 

reasonable reliance require the same analysis and that reasonable reliance requires 

a subjective inquiry. Id. at 648–49 (noting in the opening statement that the 

plaintiff must prove “that the reliance was reasonable or justifiable (elements 5 or 

6)” and then explaining that the Court “must particularly consider the subjective 

effect of those circumstances upon the creditor”). At least in this Circuit, that is 

simply not true. The Seventh Circuit has been clear that the reasonable reliance 

test is objective: it asks whether the reasonably prudent lender would have relied on 

the debtor’s false statements. In re Morris, 223 F.3d at 553. Thus, a subjective 

inquiry into the thoughts of the loan officer that approved the loans is not enough to 

satisfy this objective reasonable person standard. 

Relying on Hurston v. Anzo (In re Anzo), 562 B.R. 819 (Bankr. N.D. Ga. 

2016), Cosman contends that his fraudulent statements regarding his interests in 

Cosman LLC and Cosman Family Limited Partnership should have been a red flag 

and, therefore, the Bank could not have reasonably relied on those statements 

without further investigation. Dkt. 14, at 12. But citation to In re Anzo is not 
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persuasive. First, that case comes from a district court in Georgia, and is not 

binding on this Court. Camreta, 563 U.S. at 709 n.7. Second, the In re Anzo facts 

occurred in the middle of the “deep recession” of 2008 and 2009. In re Anzo, 562 B.R. 

at 833. Unlike here, that case also presented multiple red flags that should have 

prompted further inquiry. Id. at 834. At bottom, that case says nothing about false 

financial statements that include ownership in family businesses in a significantly 

different economic environment.

In this case, the Bank presented an affidavit of Steven Henderson, Senior 

Vice President and Manager of Special Assets, the department to which Cosman’s 

loans were transferred. Henderson, having reviewed the internal business records, 

stated that the Bank relied on the false statements offered by Cosman.2 And the 

Bankruptcy Court reviewed the financial statements and determined that nothing 

would have alerted the reasonably prudent lender to any need for further 

investigation. 

Cosman argues that Henderson’s testimony regarding the Bank’s reliance on 

Cosman’s false financial statements is conclusory and without factual foundation. 

Dkt. 14, at 9. Though Cosman fails to cite any authority to support this proposition, 

he is correct that merely conclusory affidavits would not be enough. Wheatley v. 

Factory Card & Party Outlet, 826 F.3d 412, 419 (7th Cir. 2016) (“Wheatley’s 

affidavit contains conclusory statements that she could perform the job with the 

2 Henderson’s affidavits are located in this Court’s docket at Dkt. 8-3, at 12–21 (hereinafter 

“Henderson First Affidavit”); Dkt. 8-4, at 151–53 (hereinafter “Henderson Second 

Affidavit”).
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medical boot, but the facts regarding her abilities when wearing the boot do not 

support that conclusion.”). But Henderson’s affidavits are not merely conclusory. 

His first affidavit includes more than eight pages of factual details concerning the 

history of the Cosman account, the security interests the Bank took in support of 

the loans, and that the Bank would not have loaned the monies to Cosman had it 

known of his falsehoods. See Henderson First Affidavit. That is enough to establish 

a factual foundation for Henderson’s testimony.

Cosman also points to Henderson’s affidavit statement regarding reliance on 

the fraudulent statement that Cosman “was the beneficiary of a ‘promissory note to 

be owed to the defendant in the amount of $1,500,000 executed by the defendant’s 

father’”—the “defendant” being Cosman. Henderson First Affidavit, ¶ 19. He argues 

that this statement should have been a red flag, but he cites no authority that 

shows such a loan to be a red flag. Dkt. 14, at 10. On the contrary, the loan is not a 

red flag. Cosman is involved in a family business that, at least at one time, dealt in 

the millions of dollars. A creditor’s failure to see a $1,500,000 financial transaction 

under these circumstances remains well within the range of objective 

reasonableness.

Without any red flag, or any indication that the Bank should have 

investigated further, the Bank’s reliance was objective reasonable, and the 

Bankruptcy Court was correct to grant the Bank’s motion for summary judgment on 

Count II.3

3 Cosman contends that the Bank has the burden of persuasion and proof and that he 

should have the opportunity to cross-examine Henderson and subpoena other witnesses. 
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B. The Affidavits

In support of its position, the Bank filed two affidavits of Steven Henderson, 

Senior Vice President and Special Assets Manager of Busey Bank. Cosman also 

filed his own affidavit. Dkt. 8-4, at 118–19 (hereinafter “Cosman Affidavit”). 

Though not well developed, Cosman’s opening brief seems to argue that a

genuine issue of material fact exists because Rule 56 “does not authorize trial on 

affidavits.” Dkt. 14, at 7. Later in his brief, Cosman argues that he “did counter the 

affidavit of Henderson with his own affidavit.” Id. at 8. In his reply brief, Cosman 

further argues that Henderson’s affidavits have no foundation and should carry 

“very little weight.” Dkt. 17, at 5–6. He further contends that the issue at hand is a 

factual one and should not be decided on the affidavits. Id. at 6. 

To begin, the assertion that Henderson’s affidavit should carry “very little 

weight” assumes that the Court weighs evidence on a motion for summary 

judgment. That would amount to exactly the type of trial on the affidavits that 

Cosman correctly explains is not permitted at this stage. A federal court’s “job when 

assessing a summary judgment motion is not to weigh evidence, make credibility 

determinations, resolve factual disputes and swearing contests, or decide which 

Dkt. 17, at 6. But this is the summary judgment stage. As the Seventh Circuit has put it, 

this is the time to “put up or shut up.” E.g., Goodman v. NSA, Inc., 621 F.3d 651, 654 (7th 

Cir. 2010) (“We often call summary judgment, the ‘put up or shut up’ moment in litigation, 

by which we mean that the non-moving party is required to marshal and present the court 

with the evidence she contends will prove her case. And by evidence, we mean evidence on 

which a reasonable jury could rely.”); see also BMO Harris Bank, N.A. v. Vista Mktg. Grp. 

(In re Vist Mktg. Grp.), 548 B.R. 502, 514 (Bankr. N.D. Ill. 2016). Moreover, Cosman had 

the opportunity to cross-examine Henderson if he deposed him. He eschewed that 

opportunity, and so now cannot bellyache about Henderson’s un-cross-examined affidavits. 
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inferences to draw from the facts.” Miller v. Gonzalez, 761 F.3d 822, 827 (7th Cir. 

2014). At bottom, Henderson’s affidavit is sufficient for summary judgment 

purposes if it meets the criteria set out in Fed. R. Civ. P. 56(c)(4); that it is “made on 

personal knowledge, set[s] out facts that would be admissible in evidence, and 

show[s] that the affiant or declarant is competent to testify on the matters stated.” 

Henderson’s affidavits meet these requirements. The affidavits explain that 

Henderson reviewed the business records relevant to the Cosman loans. Henderson 

First Affidavit, ¶ 1. They explain that Henderson had access to all of those business 

records because he was responsible for managing the loans. Id. ¶ 2. But because 

Henderson was not involved in the decision to issue the loans, he has no personal 

knowledge of that process. Instead, the personal knowledge supporting his 

testimony is limited to his review of the business records associated with the 

Cosman account. So, he can speak only to the content of those records and not the 

subjective mindset of those directly involved in the loan offer itself. The other two

requirements are also met. Cosman does not challenge the eventual admissibility of 

the business records that support Henderson’s testimony, nor does he challenge 

Henderson’s competency to testify. Dkt. 17, at 5. Thus, the Henderson affidavits are 

sufficient under Rule 56(c)(4) for the purpose of describing what the Bank’s business 

records show. 

Although Cosman did file his own affidavit, he has not shown that the facts 

set out in Henderson’s testimony are in dispute. Henderson’s affidavits reflect his 

review of the Bank’s loans to Cosman. They, along with the financial statements, 
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establish that the Bank reasonably relied on Cosman’s false financial statements—

an objective test. Henderson First Affidavit, ¶¶ 3, 33–34; Henderson Second 

Affidavit, ¶ 12. And Cosman’s affidavit does not purport to counter that. Cosman’s 

affidavit asserts that Jeffrey Rohlwing was his primary loan officer, and that 

Cosman had no dealings with Henderson until after he defaulted on his loan 

obligations to the Bank. Cosman Affidavit, ¶ 3. He also notes that Mr. Rohlwing did 

not request any additional information from him or share the results of any 

appraisals, id. ¶ 4, which he was not required to do. The Bank, however, has not 

challenged those factual assertions, and the assertions do nothing to counter any of 

the assertions in Henderson’s affidavit because the Court is not required to perform 

a subjective inquiry. 

In Posey v. Skyline Corp., the Seventh Circuit found no genuine dispute of 

material fact in an employment discrimination case when the defendant company 

filed affidavits asserting that it had conspicuously posted the required notice in the 

lunchroom. 702 F.2d 102, 105 (7th Cir. 1983). Posey responded with his own 

affidavit contending that he glanced at the posters on the lunchroom bulletin board 

almost every day and could not recall ever seeing such a notice. Id. But the Seventh 

Circuit determined that Posey’s affidavit was insufficient to create question of fact: 

“Posey’s affidavit merely indicates that Posey never saw the ADEA notice, which is 

not the same as an averment that the notice was not in fact conspicuously posted.” 

Id. at 105–06. Although some Seventh Circuit judges have questioned that decision, 

it remains binding precedent. See id. at 106–07 (Cudahy, J., dissenting); 
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Unterreriner v. Volkswagen of Am., Inc., 8 F.3d 1206, 1213–14 (7th Cir. 1993) 

(Rovner, J., dissenting).

Here, Cosman’s affidavit provides even less than the counter affidavit in 

Posey. Posey’s affidavit actually contended that the company had not posted the 

required notice. Conversely, Cosman’s affidavit merely asserts that the Bank’s 

affiant was not his loan officer. It does not assert that the content of Henderson’s 

affidavit is wrong. Thus, Cosman’s contention that his affidavit creates a question of 

fact cannot stand in light of Posey. Taking Henderson’s affidavits and Cosman’s 

affidavits as true, Busey Bank is still entitled to judgment as a matter of law. At 

bottom, Cosman’s insistence that Henderson was not involved in the loan-making 

process would only be relevant if the reasonable reliance test was subjective rather 

than objective. But it is not. As explained above, it is circumstantial evidence of 

actual reliance and determines whether the Bank’s conduct conforms to a 

reasonably prudent lender standard. Thus, the fact that Henderson was not 

involved in the loan-making process is irrelevant.

Cosman next argues that Henderson’s affidavit shows that the Bank 

“justifiably,” as opposed to “reasonably,” relied on Cosman’s false financial 

statements. He seems to argue that the Bankruptcy Court should have accepted 

this reference as a judicial admission. Dkt. 14, at 7. Curiously, Cosman then 

contends that the Bankruptcy Court inappropriately substituted or corrected 

Henderson’s factual statements made under oath. Id. at 8. But whether the Bank 

justifiably or reasonably relied on Cosman’s false financial statement is a legal 
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conclusion. And the Bankruptcy Court was correct not to accept Henderson’s legal 

conclusion, if that is what he meant to assert. Pfeil v. Rogers, 757 F.2d 850, 862 (7th 

Cir. 1985) (“Because legal argumentation is an expression of legal opinion and is not 

a recitation of a ‘fact’ to which an affiant is competent to testify, legal argument in 

an affidavit may be disregarded.”).

III. Conclusion

For the reasons explained above, the Court affirms the Bankruptcy Court’s 

decision granting summary judgment on Count II in favor of Busey Bank. The Bank 

reasonably relied on Cosman’s false written financial statements, and his debts to 

Busey Bank are, therefore, nondischargeable under 11 U.S.C. § 523(a)(2)(B). 

Date: May 12, 2021

___________________________

Honorable Iain D. Johnston

United States District Judge

Northern District of Illinois

Western Division