It is not uncommon for a creditor to assign a debt or the right to collect money owed from a debtor to another party. In such instances, the assignee enjoys the same rights and privileges as the creditor did prior to assigning the debt. Thus, if a creditor’s debt was deemed non-dischargeable, it will likely remain so after it is assigned under the doctrine of issue preclusion. A California court recently explained issue preclusion in a case in which it affirmed the bankruptcy court’s ruling that the debt in question was non-dischargeable. If you wish to pursue legal relief from your debts, you should meet with a knowledgeable California bankruptcy lawyer to discuss your options.
History of the Case
It is reported that the plaintiff filed a bankruptcy action. During the course of proceedings, the bankruptcy court deemed a debt owed to the defendant non-dischargeable on the basis of issue preclusion. The debt was assigned to the defendant by the plaintiff’s former employer and represented a judgment in state court for punitive and compensatory damages. The plaintiff appealed, arguing that the court incorrectly applied issue preclusion to the judgment. The bankruptcy appellate panel affirmed the lower court’s ruling, and the plaintiff appealed to the Court of Appeals.
Issue Preclusion in Bankruptcy Matters
The doctrine of issue preclusion applies to matters in which a party seeks exceptions from discharge pursuant to the bankruptcy code. Issue preclusion, which is also referred to as collateral estoppel, bars a party from re-litigating factual issues that have been determined in a prior action. Pursuant to the full faith and credit act, the preclusive effect of a state court ruling in a subsequent bankruptcy matter is determined by the laws regarding preclusion in the state in which the judgment was granted. Continue reading