Bankruptcy helps relieve the burden of credit card and loan
debts, medical bills, back utilities and rent, and so forth.
But there are some debts that bankruptcy does not affect;
that are “immune” from a bankruptcy discharge - the word is
“non-dischargeable”. This means that when the smoke clears and the bankruptcy
is over, these debts will still have to be paid.
Previous blogs were about taxes, traffic fines, speeding tickets and
their ilk, student loans and Intentional Debt - that is, lying to get a loan –
either by preparing a false financial statement or otherwise.
Sometimes people get a loan or cash
advance or purchase a luxury item just before filing bankruptcy. The court
presumes you bought the item/got the loan with no intention of paying for it. I
talk about that here and I gave two examples.
***
The next series of debts that are
not discharged in bankruptcy are those that are a willful and malicious injury
to another person or their property.
Willful. An intentional act. This is
somewhere between “just an accident” and a moustache-twirling villain.
Malicious means eeeeevil! I once
used the phrase “cackling with glee” in a lawsuit where maliciousness was
alleged. But it also includes being SO reckless and thoughtless that “it was an
accident” doesn’t fly.
If a storm knocks a tree onto my neighbor’s car, it was an
accident.
But what if I were sawing down the tree and it smashed into
my neighbor’s car? I list this potential debt in my bankruptcy I filed the next
day. My neighbor challenges the dischargeability saying it was willful. I may
be as sorry as I can be about the damage, he says, but my chopping down my tree
was an intentional act.
Does that count?
No judge will see this as anything
but an accident. Willful? Yes, by its definition, but still an accident.
Unless …
What if the day before he ran over my dog with that car?
Hmmm …
Or let’s change the facts to make me less vengeful: what if
my neighbor asked me to wait five minutes so he could get his keys and move his
car but I kept chopping?
These are where law school final exam questions come from.
Here’s another example: I like this one.
Suppose the neighbor’s kid loves to sneak onto my yard and
jump into my swimming pool. Especially when I am gone and when it is dark after
I have gone to sleep.
I get tired of it, so I drain my pool. The kid jumps in that
evening shortly after midnight and breaks his leg.
Willful? Yes, it was not an accident. But willful enough to
be nondischargeable?
Malicious? Maybe not.
It was my pool on my yard, the kid was trespassing; I can do what I
want! Right?
Well, not really. This question
really is iffy and the judge will have to rely on any other facts he or she can
get from the case.
If I told the kid’s parents that I
drained the pool? It’s pretty obvious I had no intention of causing him harm.
If I left a sign or a note for him?
Well, the kid will never see it at midnight …
Good question. I’d hate to be a
judge on a case like this.
***
That is the rule for Chapter 7
liquidation. What about the Chapter 13?
The rule is slightly different – the
standard is willful OR malicious.
Wait, isn’t malicious by its
definition willful? Yes, but it is one of those phrases that makes the law
sound more grandiose than it is.
Willful OR malicious means that,
whether you meant to be eeeeevil or not; if you did it with intent. It survives
the Chapter 13.
Because of the difference between the two standards: willful
AND malicious (Chapter 7) versus willful OR malicious (Chapter 13); if you have
a challenge to dischargeability based on this part of the code your odds are
better in a Chapter 7 rather than a Chapter 13.
***
Professionals
also see these issues in their bankruptcy. Lawyers, doctors, etc. As an
attorney I have to ask if there has been any complaints filed and what the
rulings were. Were there findings of willfulness or maliciousness? If it has
already been ruled on, the bankruptcy judge isn’t going to change it.
Bankruptcy Court is not a court of appeals.
I have
also seen people who run their own construction business defending these kinds
of actions. The siding was poorly done. The landscaping was awful or not
completed.
Proving
these kinds of businessmen did something willful and malicious is difficult. In
order to lose, the maliciousness would have to be so obvious the Debtor’s
attorney will try to settle and avoid a hearing before the judge.
***
A good local bankruptcy attorney will have the experience and
knowledge to know if the injury caused was willful enough to affect the
dischargeability of this kind of debt.
***
More “Intentional Debts” next time …
Copyright
2016 Michael Curry
My name is
Michael Curry and I have practiced law in Mount Vernon, Fairfield, Flora and
throughout Southern Illinois since 1992. During that time, I have helped more
than 5,000 people (and businesses) overcome their financial difficulties by
filing for bankruptcy. As a solo practitioner, I will also be happy to help
protect you and your family’s future with estate planning, wills,
powers-of-attorney, real estate transactions and other legal services.
Please
call or text me at 618-246-0993, email me at michael.curry.law@gmail.com or send me a letter: 123 South 10th Street, Suite 507, PO Box 93, Mount
Vernon, IL 62864
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