Written by attorney Pierre George Basmaji

Digging Deeper into "Willful and Malicious" Injuries in Bankruptcy

One of the major reasons debtors seek bankruptcy protection is to shed themselves of responsibility for judicial judgments or allegations. Recognizing this, Congress decades ago made it difficult for some forms of judicial judgments to be discharged in bankruptcy. In Section 523(a) of the Bankruptcy Code, there are several judgments whose dischargability may be challenged. These include tax judgments, judgments for domestic support (or other obligations to a spouse or child) and judgments where the debtor violated election or securities laws. Other than domestic support or tax judgments, perhaps the most common trap for bankruptcy petitioners is the bar on the dischargability of debts resulting from a debtor's "willful and malicious" injury to another person or entity (subsection 523(a)(6)). For nearly a century, the Supreme Court of the United States held a very broad interpretation of that exception. Essentially, if the debtor did anything intentional that led to another's injury, that was enough to not discharge the liability. See Tinker v. Colwell, 193 U.S. 473 (1904). For example: let's say you threw a ball out of your window for no reason, believing there was nobody or nothing that could get damaged but, alas, the ball did hit somebody or break something; since you willfully threw the ball, that liability could not be discharged. Essentially, this put debtors on the hook for liabilities where they were merely reckless or even negligent. Bankruptcy would do nothing for you if you were accused of any tort. In 1998, the Supreme Court greatly narrowed the scope of the discharge exception. In Kawaahua v. Geiger, 523 U.S. 57 (1998), the Court held that "willful" modifies "injury" in 523(a)(6) and that the debtor must maliciously intend to specifically injure the person or property in order for the liability to not be discharged. The difference is, on its face, rather subtle but extremely important. In the example I gave in the above paragraph, the debtor would be able to discharge the liability since the injury to the other person would have just been due to recklessness or negligence, not a specific intent to injure. To repeat: in order for a tort liability to not be discharged in bankruptcy, the debtor must specifically intend to maliciously injure a person or entity. Practically speaking, how does a person with a judgment or allegation for "willful or malicious" injury against the debtor enforce it in bankruptcy court? The judgment will be discharged automatically if the plaintiff does not attempt to defend his/her interests in bankruptcy court. S/he goes about this by filing an adversary complaint, which could lead to a mini-trial in the bankruptcy court to determine whether the liability can be discharged. If the plaintiff has a judgment, it is a fairly routine matter; the language of the judgment will be enough to make a determination since all facts would have been adjudicated by a court of competent jurisdiction. The bankruptcy judge will just follow the previous judgment. If, however, there is no judgment and only a complaint has been filed (or, possibly, the plaintiff has only made a demand), then the adversary proceedings become much more involved. The bankruptcy court will have to hold a full trial on the issue to determine the facts in dispute and come to a judgment. This will probably involve discovery, witnesses, etc., the whole nine yards of a federal trial. The substantive law of the jurisdiction where the injury allegedly occurred would be applied by the bankruptcy judge (for example, if the injury allegedly occurred in Texas and the Texas courts would otherwise have jurisdiction, the tort law of Texas will apply, even if the debtor filed for bankruptcy in Los Angeles).

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