Last week I wrote about three types of debts that may not be discharged in a specific case. These are debts that are incurred by a debtor taking cash advances from a credit card totaling $950 or more within 70 days prior to the debtor filing a bankruptcy case, luxury purchases totaling $675 or more within 90 days of filing, and debts that are incurred by fraud. For these three types of debts, the creditor has to bring an action in a timely manor, the debtor must prove that he or she intended to pay back the charges/cash advances at the time the activity took place, or, in the case of a dispute regarding luxury purchases, that some of all of the purchases were not, in fact, luxury purchases for the purposes of the statute.
Section 523(a)(6) of the Bankruptcy Code provides that a debt incurred by a debtor because of the willful and malicious injury by the debtor to another entity or to the property of another entity can be excepted from discharge.
As is the case with the three types of debts I reviewed last week, there is no presumption that a debt caused by a willful and malicious injury be excepted from discharge. In order to have this type of debt excepted from discharge, the creditor has to bring an action in bankruptcy court, and the creditor has the burden of proving that the debt should not be discharged.
It’s important to note Congress deliberately did not narrow who the creditor can be in carving out this exception to discharge. The statute refers to an “entity,” not a person. Under the Bankruptcy Code’s definition section, the term entity refers to a “person, estate, trust, governmental unit and United States Trustee.” So the scope of who can be a creditor in under this statute is broad; however we are almost always talking about an injury to a person or to the property owned by a person.
One significant difference between chapter 7 and chapter 13 bankruptcy cases is that more types of debts can be discharged in a chapter 13 case than chapter 7. This is called the chapter 13 “super discharge.”
Section 1328 of the Bankruptcy Code defines what debts are discharged in a chapter 13 case. Unlike section 523, which lists 18 different types of debts that are not discharged in a chapter 7 case, section 1328 lists only 11 types of debts that are not subject to discharge in a chapter 13 case.
It is worth noting that prior to the significant changes in the bankruptcy law that were made in 2005, there were more types of debt subject to the chapter 13 “super discharge” than there are now. However, there are still several types of debts that are difficult to discharge in a chapter 7 case that can be discharged in a chapter 13 case, and for that reason, people with debts like these should seriously consider using a chapter 13 payment plan as a way to resolve these obligations by making affordable monthly payments in a chapter 13 case.
People considering chapter 13 to discharge debt that is not dischargeable in a chapter 7 case should be cautioned, though: it is a requirement of chapter 13 that cases by filed by the debtor “in good faith.” Good faith requires that chapter 13 debtors be honest about the facts of their case, and not use chapter 13 to escape the payment of obligations imposed by other courts without first making a good faith effort to comply with other court orders.