Debt Owed to Trust is DSO

Posted by NCBRC - March 9th, 2023

Where the debtor’s payments to his ex-wife’s Trust were in lieu of alimony and were understood by both the debtor and his ex-wife to be for her future support, the payments were in the nature of a domestic support obligation not dischargeable in bankruptcy. Hundt v. Ventrone (In re Ventrone), No. 21-11643, Adv. Proc. Nos. 22-00005, 22-00026 (Bankr. E.D. Pa. Jan. 2023). Read More

Passive Voice and 1885 Case Sink Debt Discharge

Posted by NCBRC - February 23rd, 2023

SCOTUS determined that section 523(a)(2)(A), which excludes from discharge debts incurred by fraud, applies to innocent partners of the fraudulent actor where the statute does not draw any connection between the individual debtor and the fraudulent conduct but instead is written in passive tense saying merely that a debt owed by an individual and procured by fraud is nondischargeable. Bartenwerfer v. Buckley, No. 21-908, __ U.S. __ (Feb. 22, 2023). The decision was unanimous with a concurring opinion by Justice Sotomayor adding that the decision turned on the fact that the debtor had an agency relationship with the fraudulent actor. Read More

Who Would Win in a Fight, Allowed Claim or Confirmed Plan?

Posted by NCBRC - December 9th, 2022

The winner? Confirmed plan. Where the mortgagee had notice and opportunity to object to confirmation of the debtors’ chapter 13 plan providing for mortgage arrears in the amount of approximately half the mortgagee’s allowed proof of claim, the mortgagee could not be heard, at the debtors’ successful completion of their plan, to complain that the debtors still owed pre-petition arrears. In re Edelstein, No. 17-11461 (Bankr. N.D. Ill. Nov. 7, 2022). Read More

First Circuit Dodges Late-Filed Tax Return Issues

Posted by NCBRC - December 2nd, 2022

Faced with the question of whether the debtor’s tax debt based on a late-filed tax return was excepted from discharge, the circuit declined to reexamine its holding in Fahey where it applied the strict “one day late” rule, found the debtor waived his argument in support of an objective test that does not consider timing of filing, and instead, held the debtor’s late-filed tax return did not meet Beard’s subjective test for a “return.” In re Kriss, 21-1206 (1st Cir. Nov. 22, 2022). Read More

No D/C of Post-D/C Transaction Based on Pre-Bankruptcy Guaranty

Posted by NCBRC - November 2nd, 2022

A post-discharge liability arising out of pre-petition personal guaranty was not discharged in the debtors’ bankruptcy where the debt was based on transactions occurring four years after the debtors received their discharge. Reinhart Foodservice, LLC v. Schlundt, No. 21-1027 (E.D. Wisc. Oct. 27, 2022). Read More

Embezzlement Claim Based on Divorce Decree Survives Motion to Dismiss

Posted by NCBRC - October 14th, 2022

The plaintiff’s allegations of embezzlement with respect to a business debt the debtor, her ex-husband, owed to her were sufficient to withstand a motion to dismiss, where the plaintiff co-owned the business with the debtor and the debtor failed to comply with the family court’s order to set aside income from the business for the plaintiff. Bailey v. Bailey, No. 22-10013, Adv. Proc. No. 22-1001 (Bankr. E.D. Ky. Sept 26, 2022). Read More

Debt Based on Breach of Pre-Divorce Stipulation Nondischargeable

Posted by NCBRC - August 26th, 2022

A debt based on breach of a Stipulated Agreement that was incorporated but not merged into the final Judgment of Divorce was a debt “in connection with” a divorce decree within the meaning of section 523(a)(15) and was therefore nondischargeable in bankruptcy. Monassebian v. Monassebian, No. 21-41251, Adv. Proc. No. 21-1162 (Bankr. E.D.N.Y. Aug. 1, 2022). Read More

Debt To Client Security Fund Dischargeable as Compensatory

Posted by NCBRC - August 5th, 2022

“Indebtedness arising from a disbarred attorneys’ obligation to reimburse the State Bar for payments made by the CSF to victims of that attorney’s misconduct are not excluded from discharge under § 523(a)(7).” Kassas v. State Bar of Calif., No. 21-55900 (9th Cir. Aug. 1, 2022).

After the chapter 7 debtor was disbarred from the practice of law, the State Supreme Court ordered him to pay restitution in the amount of $201,706 to be distributed to 56 of his clients, and $61,122.27 to the State Bar to reimburse its costs of investigation and discipline. The court also ordered the debtor to reimburse California’s Client Security Fund (CSF) for its payments to clients injured by his misconduct. Read More

Debtor Not Fiduciary to Mother’s Nursing Home

Posted by NCBRC - July 23rd, 2022

A state court judgment for breach of contract was dischargeable in the debtor’s chapter 7 bankruptcy where the breach occurred when the debtor, acting as Power of Attorney for her mother, entered into a contract with her mother’s nursing home and, acting upon advice from her mother’s legal counsel, failed to comply with its terms. The court found the debtor was not a fiduciary with respect to the nursing home and did not act with willfulness or malice. Presbyterian Home for Central NY, Inc. v. DeFazio, No. 20-80009 (June 23, 2022). Read More

Conjunction Junction Solves the Case

Posted by NCBRC - June 14th, 2022

Where the debtor’s restitution obligation was payable to Identified Consumers rather than a governmental unit, it did not fall within section 523(a)(7)’s exception to discharge. State of New Hampshire, Banking Department v. Dargon, No. 20-30300, Adv. Proc. No. 20-3017 (Bankr. D. Mass. March 11, 2022). Read More

Tag Archive: dischargeability