BANKRUPTCY CASE LAW:
DEBTS NOT DISCHARGEABLE


The following is for the exclusive use of attorneys. 

This firm does not make any representations as to the accuracy or current status of any case cited herein. 

Most Complaints objecting to dischargeability of a debt includes 523(a)(6) include a "catchall" count. We've been successful in knocking out that count in almost every case.  Regarding intent and how to prove it, the best advice I can offer is to use Kawaauhau v. Geiger, 523 U.S. 57, 140 L.Ed.2d 90, 118 S.Ct. 974 (1998) as your guide. The Supreme Court held that the actor needed to be aware that the conduct was not only wrongful, but also would necessarily cause the injury in question to rise to the "willful and malicious" standard. Since Geiger, most courts have used a subjective approach to determine the intention required for "willfulness." In re Moore, 357 F.3d 1125 (10th Cir. 2004); In re Su, 290 F.3d 1140 (9th Cir. 2002); In re Markowitz, 190 F.3d 455 (6th Cir. 1999).

Collateral Estoppel principles: The Supreme Court has held that “collateral estoppel principles do indeed apply in discharge exception proceedings pursuant to §523(a).” Grogan v. Garner, 498 U.S. 279, 285 fn. 11, 111 S.Ct. 654 (1991). In the Ninth Circuit, collateral estoppel principles are applied in nondischargeability litigation to the extent that they would apply were the litigation being held in a court of the state where the original judgment was entered. In re Nourbakhsh, 67 F.3d 798, 800 (9th Cir. 1995), citing, Marrese v. American Academy of Orthopaedic Surgeons, 470 U.S. 373, 380 (1985) This is true, in the Ninth Circuit, even in default cases.  Nourbaksh, supra, 67 F.3d at 800.

It appears that most states find collateral estoppel should be applied where (1) there is indentity of the parties, (2) the issues are identical, and (3) the matter has been litigated to final conclusion.  See, e.g., Trucking Employees of North Jersey Welfare Fund, Inc. v. Romano, 450 So.2d 843, 845 (Fla. 1984); Mobil Oil Corp. v. Shevin, 354 So.2d 372, 374 (Fla. 1977).  Other states sometimes add that the issue must be "necessarily" decided in the prior litigation, and also be "decisive."  See, e.g., Buechel v. Bain, 97 N.Y.2d 295, 303, 740 N.Y.S.2d 252, 766 N.E.2d 914 (2001). 

Griffin v. Wardrobe, No. 07-16635  U.S. 9th Circuit Court of Appeals, March 16, 2009
In an action to declare a state judgment for fraud non-dischargeable in bankruptcy, summary judgment for Plaintiff is reversed, where the state court improperly allowed Plaintiff to amend her complaint in violation of the automatic stay under the Bankruptcy Code.  The stay had been lifted for the sole purpose of the Movant pursuing the Debtor’s bond.

Lockerby v. Sierra, No. 06-15928  U.S. 9th Circuit Court of Appeals, August 07, 2008
In the bankruptcy context, an intentional breach of contract cannot give rise to nondischargeability under 11 U.S.C. section 523(a)(6) unless it is accompanied by conduct that constitutes a tort under state law.
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CREDITOR WITH NONDISCHARGEABLE DEBT CAN COLLECT INTEREST FOLLOWING CHAPTER 13 DISCHARGE  In re Foster, ___ F.3d ___ (9th Cir. 2003) – Feb. 8, 2003 Debtor's chapter 13 plan provided for full payment of delinquent non-dischargeable child support. Debtor completed the plan and was granted a discharge. Subsequently, Ventura County District Attorney went after debtor for the accumulated interest that was not paid through the plan. Held, plan could not provide for payment of interest, and creditor could collect unpaid interest following discharge. This is the majority rule.

A claim for post-petition interest on a debt not dischargeable in Chapter 13 under 11 U.S.C. § 1328(a) is not part of the bankruptcy estate because such unmatured interest was not part of the debt as of the date of filing the petition. Thus, a creditor cannot insist on interest being paid through the plan. And, the Code does not explicitly prohibit collection of post-petition interest after a debtor completes a confirmed chapter 13 plan.

CRIMINAL RESTITUTION and CHAPTER 13: While criminal restitution is non-dischargeable under section 523, it is not one of the listed priority debts in section 507 (the same problem as with educational loans).  Therefore, any attempt to pay that unsecured debt in full in the plan without the same percentage payback to other unsecured creditors would likely cause the trustee to object.  Instead, try to get the agency to whom the restitution is owed to agree to a long term payback of the restitution--longer than the Ch 13 plan's duration .  Then, using section 1322(b)(5), pay the restitution outside the plan as a budget expense.

OPINION SUMMARIES ARCHIVE FindLaw archives case law summaries of opinion issued since September 2000 by the U.S. Supreme Court, all thirteen Federal Circuit Courts, the California Supreme Court, the California Appellate Courts, and the New York Court of Appeals.  http://caselaw.lp.findlaw.com/casesummary/index.html