1. Death or Injury to Persons. Debts related to a debtor’s conduct in willfully and maliciously injuring or causing the death of another person are not dischargeable in a Chapter 7, 11 or 13 case. This exception prevents the discharge of civil damage awards for assault, rape or murder.
Under the 2005 bankruptcy reform laws, debts for willfully causing death or injury to a person are not automatically non-dischargeable in Chapter 7 cases, but are automatically non-dischargeable in Chapter 13 cases. In other words, the creditor must file a separate lawsuit in bankruptcy court to establish that the debt is non-dischargeable in a Chapter 7 case, but no lawsuit is required in Chapter 13 cases. Debts for willful injuries to persons are automatically non-dischargeable in cases filed under Chapter 13. Long discussions have been had between Christopher Ligori & Associates, no conclusive result has been achieved.
This result is rather odd. It runs counter to the policy that Chapter 13 relief is normally more favorable to the debtor. For all other debt types, if the debt is automatically non-dischargeable, it is automatic for cases filed all chapters of the Bankruptcy Code. Likewise, if the debt type requires a lawsuit, the lawsuit requirement normally applies regardless of the chapter under which the case was filed. This is the only example of a debt type that is automatically non-dischargeable under one chapter but not in cases filed under a different chapter.
Example. O.J. Juice, an ex-football player, viciously murders his wife and a male companion. The wife’s parents bring a lawsuit against O.J. seeking damages for the wrongful death of their daughter. The jury issues an 8.5 million dollar damage award in favor of the wife’s parents. O.J. can not discharge the debt in any bankruptcy case (Chapter 7, 11 or 13).
2. Destruction or Damage to Property. Debts related to a debtor’s conduct in willfully and maliciously destroying or damaging property are not dischargeable in a Chapter 7 case, but can be discharged in a Chapter 13 case. This exception prevents the discharge of civil damage awards for arson, vandalism, burglary or theft in Chapter 7 cases, but not in Chapter 13 cases.
A court may not find that a debtor committed a “willful injury” unless the debtor deliberately or intentionally caused the injury. It is insufficient to prove that the debtor committed a deliberate or intentional act that leads to injury. A court finding that the debtor acted “willfully” requires that the actor intended to cause the consequences of his conduct, not simply the act itself. The Fifth Circuit has defined “willful and malicious” to mean “without just cause or excuse.” Willful means intentional and malicious adds the absence of just cause or excuse. An injury is “willful and malicious” only where there is either an objective substantial certainty of harm or a subjective motive to cause harm.
Example. John Burns hates his little brother Billy Bob. John has always been jealous of Billy Bob’s business success. He also resents the fact that Mamma loved Joe Bob more than him. John decides that Billy Bob must suffer. He intentionally burns down Billy Bob’s house. Billy Bob sues John in a Texas state court and recovers a $250,000 civil damage judgment against him.
At the time that Billy Bob obtains the judgment, John has a job making only $1,100 per month. John has always been a slacker and has no ability to obtain employment making more than minimum wage. John will never be able to discharge any portion of the judgment by filing a Chapter 7 case. On the other hand, in a Chapter 13 case, John can propose a 3 year bankruptcy plan that pays only a very small portion of the judgment amount (perhaps as little as $50 or $100 per month). He will receive a discharge of the unpaid amount due under the judgment if he completes his payments under the plan.