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Bankruptcy Discharge of Litigation Debts

Bankruptcy Discharge of Litigation Debts

An understanding of whether a debt is dischargeable in bankruptcy is essential to a business and commercial litigator for at least three reasons – – (1) to structure the claims being brought in the complaint; (2) to evaluate the credibility and risk of a threat to file bankruptcy and (3) to evaluate and structure settlements. Fortunately, it is not hard for a non-bankruptcy litigation attorney to obtain a working knowledge of the dischargability of debts in bankruptcy.

Exceptions to discharge are laid out at 11 USC § 523. The exceptions that most commonly arise in the context of a commercial or business litigation are contained in the following subsections:

(a)(2) – obtaining money, property, services, or credit by false pretenses or fraud;

(a)(4) – for fraud or defalcation while acting as a fiduciary, embezzlement or larceny; and

(a)(6) – for willful and malicious injury.

Midland Michigan business, real estate, construction and  commercial lawyer W. Jay Brown provides experienced representation of businesses and individuals throughout Mid- Michigan

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