California Court Discusses Grounds for Deeming a Debt Nondischargeable

One of the benefits of bankruptcy is that it allows parties to discharge their debts so that they can regain financial security and move forward with their lives. Certain debts cannot be discharged in bankruptcy, however, such as those that arise out of the malicious or willful injury to another party. Recently, a California court explained what conduct constitutes willful and malicious behavior so as to render a debt nondischargeable in a case in which it ultimately rejected the debtor’s appeal. If you have significant debts, you could qualify for relief via bankruptcy, and it is smart to talk to a California bankruptcy attorney about your options.

Procedural History of the Case

It is alleged that the debtor filed for Chapter 7 bankruptcy relief. One of the debts he sought to have discharged was a subrogation claim from an insurance company. The insurance company moved to have the debt deemed nondischargeable on the grounds that it arose out of the debtor’s willful and malicious acts. The bankruptcy court ruled in favor of the insurance company, deeming the debt nondischargeable, and the debtor appealed. The bankruptcy appellant panel affirmed the bankruptcy court’s decision, and the debtor filed an appeal to the Ninth Circuit Court of Appeals.

Grounds for Deeming a Debt Nondischargeable

Upon review, the court affirmed the bankruptcy court’s ruling. In doing so, it explained that the court did not make a clear mistake in finding that the debtor’s conduct was tortious as required for reversal. Specifically, the court explained that the defendant illegally converted another person’s vehicle without her permission, depriving her of her property and causing her to suffer damages.

Further, the court found that the bankruptcy court did not make a clear error in determining that the debtor’s acts were willful as defined by the bankruptcy code. The court noted that conduct will be deemed willful if it arose out of the debtor’s subjective motive to cause harm, and the debtor knew that damages were substantially certain to arise from their behavior. The court explained that the bankruptcy court’s determination that the debtor’s actions were willful was supported by the statements he made during proceedings.

Finally, the court found that the bankruptcy court did not commit a clear error when it found that the debtor’s acts were malicious, as it involved a wrongful act that was done intentionally without just cause or excuse and which necessarily caused an injury. As such, the court denied the debtor’s appeal.

Meet with a Capable California Bankruptcy Attorney

While most debts are dischargeable through bankruptcy, not all are, and it is critical that anyone contemplating filing for bankruptcy understand how it may impact their rights and obligations. If you feel overwhelmed by your debt load, you may be able to discharge your debts through bankruptcy, and it is smart to meet with an attorney. Matthew D. Roy is a capable California bankruptcy lawyer who can advise you of your options and help you to seek the best outcome possible under the facts of your case. You can contact Mr. Roy through the form online or by calling (916) 361-6028 to set up a meeting.