Ettell

Household Credit Services claims that Christopher Ettell engaged in credit card fraud and ought to be denied a bankruptcy discharge. However, we agree with the Bankruptcy Appellate Panel (“BAP”), and affirm its decision that the debt was dis-chargeable.

*1143 I

Ettell was a licensed automobile broker, .operating a sole proprietorship known as Personal Motor Services. California law required Ettell to deposit funds paid by customers for car purchases in a trust fund separated from the business’s operating funds. See CAL. VEH. CODE § 11737 (West Supp.1999). Although aware of this requirement, Ettell began diverting client trust funds to sustain his declining business.

By the spring of 1995, Ettell had misappropriated a total of $155,000, and criminal charges were filed against him. In 1996, Ettell was convicted of violating CAL. VEH. CODE § 11737 and, as a consequence, his broker’s license was revoked in March, 1996.

During this time period, Ettell acquired a significant amount of additional debt. He refinanced the home that he had purchased in 1994. By the end of December 1995, Ettell’s unsecured nonproprietary debt was $496,000. Of that amount, approximately $70,000 was credit…