Horror Stories Sometimes Wash Up In Bankruptcy court

31 May Horror Stories Sometimes Wash Up In Bankruptcy court

Bankruptcy is a tragedy to most people. But actually debtors bring their tragedies to court with them and the court must deal with the fallout. Sometimes those tragedies are gut-wrenching.

This week the Eighth Circuit Court of Appeals handed down one of these decisions. The case involved the 2001 death of a young boy at the hands of an abuser and dealt with whether the child’s mother could discharge the civil liability that resulted.

The facts are too creepy to recite, but are more detailed in the court’s decision here. In summary the mother knew her son was being abused by her live-in boyfriend and did little or nothing to stop it while, in effect, helping to cover it up. There was no evidence she herself abused her child or that she avoided having him treated so that he would be hurt or die, however. And, as night followed day, the child died of the abuse. The boyfriend went to prison for murder and the mother went to prison for criminally-negligent homicide. The child’s father sued the boyfriend and mother for the wrongful death of the child and ultimately the mother filed bankruptcy.

In Chapter 7 bankruptcy, a debtor cannot wipe out damages incurred through willful and malicious conduct, so the father objected to the mother wiping out the liability for the death. The bankruptcy court and a divided Bankruptcy Appellate Panel granted summary judgment to the father concluding, in effect, that the criminal conviction showed sufficient intentional conduct by the mother that she could not discharge the debt.

The circuit court disagreed. It pointed out the requirement is that the debtor intended to cause an injury not simply intended to commit an act which leads to an injury. The most common example is everyday traffic: A person driving badly may cause an accident. They obviously intended to drive the car — but they did not intend to hurt anyone in doing so. The act was intentional but the injury was not. (Unless they aimed the car at someone on purpose.)

In this case, the court assumed the mother intended to ignore and cover up for the abuse. But she did not purposefully leave her child with the abuser so he would be abused. And while the mother failed to take the child to the doctor on the final night, there was no external evidence — no bleeding wounds or other obvious trauma — which would have put her on notice that medical care was required (or at least such that her neglect would be the same as intending to let him die).

So the case reaffirms the strict analysis applied to ‘willful and malicious injury’ claims. And, for practitioners, it points out the oddity that it is possible to be convicted of a crime and yet be able to eliminate the civil liability for that crime if the level of mental culpability required for the crime is less then actual intent.

But I think the case is also a testament to how tough a judge’s job can be. And why judges need to be insulated from public wrath, as they are with lifetime appointments (in the federal circuit court) or long terms (in bankruptcy court). I am confident every judge who touched this case from criminal court, to bankruptcy court, to the BAP and the Eighth Circuit was personally shocked by it. The gut reaction is to cry out for vengeance. And no doubt public sentiment would easily support judges who took that course. The harder path was, and usually will remain, to apply the law even when it might let a reckless mother (someday) get a fresh start.

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I have been a bankruptcy attorney since 1989. Our firm represents consumers filing bankruptcy almost exclusively, although I have represented bankruptcy trustees as well as creditors. For 2017-2018 I am also serving on the American Bankruptcy Institute's Commission on Consumer Bankruptcy. If you live in Eastern Missouri, visit our website, send an e-mail or give us a call (314) 781-3400. Our website: STLBankruptcy.com
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