Understanding the “Willful and Malicious Injury” Exception to Debt Discharge
The overall goal of bankruptcy is to give deserving debtors a fresh start by relieving them of most of their financial obligations. However, “most” does not mean “all.” The U.S. Bankruptcy Code lists several types of debts that are not dischargeable in bankruptcy. Among these are debts incurred by inflicting “willful and malicious injury” upon another person or entity.
If you harmed an individual or business or their property and they win a judgment establishing that your actions were willful and malicious, you cannot use Chapter 7, 11 or 13 of the bankruptcy code to escape this obligation. “Willful” means that a person intended to inflict the injury or engaged in conduct he knew was likely to cause injury. “Malicious” means an act is done without just cause or excuse, even if it is not motivated by ill will. Both of these elements must be proved by the judgment creditor, who must bring a separate case in bankruptcy known as an adversary proceeding.
An example will help illustrate. Imagine that Dave gets into an altercation with his neighbor Steve and inflicts injuries that require Steve to be hospitalized. Dave pleads guilty to criminal assault. Steve then files a civil suit seeking damages. Steve prevails and is awarded $150,000. Steve’s judgment against Dave makes him one of Dave’s creditors. A few months later, Dave files for Chapter 7 bankruptcy. Steve has the right to initiate an adversary proceeding, seeking a declaration that the judgment is non-dischargeable. If Steve can prove that Dave acted willfully and maliciously, the bankruptcy court will refuse to discharge the $150,000 debt.
The assertion of the willful and malicious injury exception by a creditor can greatly complicate a bankruptcy case. The adversary proceeding often requires the bankruptcy court to conduct additional fact finding. Suppose, in the previous example, that Dave had not responded to Steve’s civil suit and a default judgment was entered. The bankruptcy court would have to determine from the criminal case and from other testimony whether Dave had intended to cause harm to Steve and whether Dave had claimed self-defense or any other justification. The guilty plea alone would not establish willfulness and maliciousness, both of which would need to be proved for the exception to apply.
Whether you are the creditor or the debtor, you need an experienced attorney to deal with a challenge to debt dischargeability. At the Law Offices of Michael Jay Berger in Beverly Hills, I have decades of experience handling all aspects of bankruptcy cases, including adversary proceedings. Please call 310-271-6223 or contact me online to schedule a free initial consultation.