Bankruptcy is amazing. It can eliminate most debts, improve your credit score in the long run, and allow you to rebuild your financial future.
Unfortunately, its power is not all-encompassing. Some debts you just can’t rid of. If you owe child support or spousal maintenance (what used to be called alimony), certain taxes, student loans, or government fines (things like parking tickets or restitution), you’re still going to have those debts after you go through bankruptcy.
And as one unfortunate filer found out, you also can’t get rid of a lawsuit you got into after a barroom brawl.
The 10th Circuit Bankruptcy Appellate Panel (BAP) sets out this entertaining and educational tale in it recent decision in Perry v. Judge.
Over in the western slope town of Grand Junction, Mr. Perry and Mr. Judge found themselves at the Derailed Pour House enjoying time with their friends and downing, presumably, a fine craft beer or artisanal cocktail. Suddenly, everyone was kung fu fighting. Mr. Judge elbowed Mr. Perry in an unfriendly and forceful way and then, after his back was turned, hit Mr. Perry in the back of his head with a coffee mug. Mr. Perry responded by cracking Mr. Judge in the face with his beer glass.
Both of them ended up in the emergency room. Perry had injuries both to his head and the hand that was holding the glass that he hit Judge with.
Perry filed a lawsuit. Judge didn’t respond. Perry ended up with a judgment against Judge for $150,000. Trying to escape liability, Judge filed a chapter 7 bankruptcy. Perry pursued Judge into bankruptcy court and filed an adversary proceeding to get the bankruptcy court to find that Judge should not be able to eliminate his debt to Perry.
The bankruptcy court found that Judge’s actions were “willful and malicious” and should be excluded from his discharge under Section 523 of the Bankruptcy Code, keeping Judge on the hook for Perry’s injuries.
Judge appealed the bankruptcy court’s decision to the 10th Circuit Bankruptcy Appellate Panel, which affirmed the lower court’s holding, keeping Judge on the hook for Perry’s injuries. Perry will be able to garnish Judge’s wages and bank account until his judgment is paid off. That’s quite the bar tab.
The BAP found that Judge’s actions fit squarely into the debts listed under Section 523, which excludes debts that arose from unacceptable behavior, such as dishonesty, fraud, or intentional injury. The BAP found that Judge’s actions satisfied both the “intentional” and “malicious” elements necessary to exclude the debt from discharge.
The BAP agreed with the lower court that since Judge hit Perry without warning, they could draw no other conclusion than that Judge intended to hit Perry, therefore making his actions intentional.
The test for whether or not an action is malicious, is whether or not the action is “wrongful and without just cause or excuse”. Judge offered no explanation for his action and video from the Derailed Pour House showed that Judge acted without Perry provoking him.
So, what have we learned? First, bankruptcy is an awesome tool for honest debtors who have found themselves in unfortunate circumstance. Second, bankruptcy will do you no good if you can’t handle your craft beer and artisanal cocktails and decide to sucker punch a stranger in a bar. I love bankruptcy. I love being able to help my clients find their way to a fresh financial. But I also love this decision. There is absolutely no excuse for Mr. Judge’s behavior.
You can read the opinion by clicking here.
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