31:
309:, 726 F.2d 452 (8th Cir. 1984). Under that test, a court should permit the discharge of debt unless the debtor knew or should have known that the debt was incurred through fraud. Because the petitioner demonstrated that she did not know the debt was incurred by fraud, and had no reason to know, the court concluded that the debt that she had incurred should be discharged.
303:. The petitioner argued in the bankruptcy court that she should be permitted to discharge debts relating to the fraud because she had no knowledge of the fraud by which the debt was incurred; instead, the fraud was allegedly done by her husband without her knowledge. The bankruptcy court adopted the "known or should have known" test arising out of
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On
February 22, 2023, the Supreme Court unanimously held that fraudulently obtained debts cannot be discharged in bankruptcy. In so holding, the Court reasoned that the exception is triggered by whether the money was obtained by fraud; the question of who committed the fraud is irrelevant.
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analyst argued that the justices' questions to counsel for the petitioner were more hostile than those to counsel for the respondent or the United States; they drew a distinction between the fraudulent origin of a debt and whether the debtor knows of that fraud.
328:, 780 F.2d 1440 (9th Cir. 1986). Instead, the Ninth Circuit refused to discharge the debt because the debt itself was incurred through fraud, despite that the petitioner had no knowledge of it. The ruling widened a
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The
Supreme Court heard oral argument on December 6, 2022. The justices focused on the language of 11 U.S.C § 523(a)(2)(A), which excepts from discharge debts incurred by "money... obtained by... actual fraud." A
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overruled the bankruptcy court, holding that the "knew or should have known" test applied by the bankruptcy court was inconsistent with
Supreme Court precedent in
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In 2012, the petitioner, Kate
Bartenwerfer, and her husband lost a jury verdict after allegedly failing to disclose defects in a house that they sold in
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Section 523(a)(2)(A) precludes Kate
Bartenwerfer from discharging in bankruptcy a debt obtained by fraud, regardless of her own culpability.
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The respondent was represented by
Zachary Tripp of Weil, Gotshal & Manges; and Janet Marie Brayer of the Law Offices of Janey Brayer.
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of
Williams & Connolly; Iain Macdonald of Macdonald Fernandez; and Reno Fernandez of the Complex Appellate Litigation Group.
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Whether an individual may be subject to liability for the fraud of another that is barred from discharge in bankruptcy under
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478:"In for a Dime, In for a Dollar? Can a Partner Escape Liability in Bankruptcy for a Fraud by Blaming Another Partner?"
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argued that the decision should apply only to debts obtained through the fraud of a partner or agent of the bankrupt.
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683:"Justices skeptical of bankruptcy protection for 'unwitting' beneficiaries of fraud"
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to the
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431:"Wiping Away Debts From Others' Fraud Weighed by Supreme Court"
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United States
Supreme Court cases of the Roberts Court
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case in which the court held that debts incurred by
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402:The petitioner was represented by Sarah Harris and
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656:. Bartenwerfer v. Buckley, Sup. Ct. No. 21-908.
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43:Argued December 6, 2022
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666:: CS1 maint: others (
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221:Ketanji Brown Jackson
301:Chapter 7 bankruptcy
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357:certiorari
297:California
287:Background
279:cannot be
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557:11 U.S.C.
392:Sotomayor
332:with the
239:unanimous
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70:Citations
703:Text of
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382:Decision
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108:Decision
88:Argument
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346:Seventh
148:Holding
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64:21-908
711:
654:(PDF)
338:Fifth
334:Ninth
277:fraud
123:Prior
713:U.S.
668:link
637:2023
588:2022
543:2022
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348:and
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