Supreme Court Will Consider Bankruptcy Debtor’s Liability for Someone Else’s Fraud
When a debtor files for consumer bankruptcy, can that debtor be responsible for a debt that has resulted from another party’s fraud even if the debtor did not know about the fraud? That is the question at the heart of a current case that is pending before the U.S. Supreme Court. The case is Bartenwerfer v. Buckley, and the case was argued on December 6, 2022. What do you need to know about the case and its potential implications for bankruptcy filings in Illinois? Our Oak Park bankruptcy attorneys can explain.
Understanding the Facts of Bartenwerfer v. Buckley
In Bartenwerfer, the married couple David and Kate Bartenwerfer purchased a house in San Francisco. They moved out of the house, and David started renovating it with Kate’s consent. However, Kate was not involved in the renovation process. After the renovation, they sold the house to the defendant, Kieran Buckley. Buckley identified defects and filed a claim against the Bartenwerfers, alleging fraud. Buckley was awarded damages by a court. Then, the Bartenwerfers filed for Chapter 7 bankruptcy.
The facts of the case establish that Kate Bartenwerfer did not have knowledge of any alleged fraud and was not involved in the renovation process in any meaningful way such that she would have known about the defects. The bankruptcy court determined that liability could be imputed to Kate as a result of the partnership with her husband. On appeal, the Ninth Circuit Court of Appeals determined that the lower court used the wrong standard for determining imputed liability in a partnership, clarifying that imputed liability applies when there is fraud “on behalf of the partnership and in the ordinary course of business of the partnership.”
Key Question for the U.S. Supreme Court
As the Court explains, this is the key question in Bartenwerfer: “May an individual be subject to liability for the fraud of another that is barred from discharge in bankruptcy under 11 U.S.C. (the “Bankruptcy Code”) § 523(a)(2)(A), by imputation, without any act, omission, intent, or knowledge of her own?”
The Supreme Court notes that circuit courts are split on the issue. Whatever the Supreme Court decides, the decision will impact bankruptcy cases involving this type of fraud in Illinois since the decision will become applicable law across the country. If you have any questions about how the case could impact your own bankruptcy filing, it is important to talk with a lawyer in order to get answers to your questions. The decision in Bartenwerfer will likely come from the Court this spring or summer.
Contact an Oak Park Bankruptcy Attorney
If you have any questions about personal bankruptcy and issues concerning bankruptcy fraud, you should seek advice from an attorney who can help as soon as possible. One of our experienced Oak Park bankruptcy lawyers can assess your situation and can provide you with advice about your bankruptcy case and what you can expect. Do not hesitate to get in touch with our firm for assistance. Contact the Emerson Law Firm for more information about how we can help you.
See Related Blog Posts:
How Much Debt is Enough to File for Bankruptcy?
Hospital Credit Card Debt: What to Know
In Bartenwerfer, the married couple David and Kate Bartenwerfer purchased a house in San Francisco. They moved out of the house, and David started renovating it with Kate’s consent. However, Kate was not involved in the renovation process. After the renovation, they sold the house to the defendant, Kieran Buckley. Buckley identified defects and filed a claim against the Bartenwerfers, alleging fraud. Buckley was awarded damages by a court. Then, the Bartenwerfers filed for Chapter 7 bankruptcy.
The facts of the case establish that Kate Bartenwerfer did not have knowledge of any alleged fraud and was not involved in the renovation process in any meaningful way such that she would have known about the defects. The bankruptcy court determined that liability could be imputed to Kate as a result of the partnership with her husband. On appeal, the Ninth Circuit Court of Appeals determined that the lower court used the wrong standard for determining imputed liability in a partnership, clarifying that imputed liability applies when there is fraud “on behalf of the partnership and in the ordinary course of business of the partnership.”
Key Question for the U.S. Supreme Court
As the Court explains, this is the key question in Bartenwerfer: “May an individual be subject to liability for the fraud of another that is barred from discharge in bankruptcy under 11 U.S.C. (the “Bankruptcy Code”) § 523(a)(2)(A), by imputation, without any act, omission, intent, or knowledge of her own?”
The Supreme Court notes that circuit courts are split on the issue. Whatever the Supreme Court decides, the decision will impact bankruptcy cases involving this type of fraud in Illinois since the decision will become applicable law across the country. If you have any questions about how the case could impact your own bankruptcy filing, it is important to talk with a lawyer in order to get answers to your questions. The decision in Bartenwerfer will likely come from the Court this spring or summer.
Contact an Oak Park Bankruptcy Attorney
If you have any questions about personal bankruptcy and issues concerning bankruptcy fraud, you should seek advice from an attorney who can help as soon as possible. One of our experienced Oak Park bankruptcy lawyers can assess your situation and can provide you with advice about your bankruptcy case and what you can expect. Do not hesitate to get in touch with our firm for assistance. Contact the Emerson Law Firm for more information about how we can help you.
See Related Blog Posts:
How Much Debt is Enough to File for Bankruptcy?
Hospital Credit Card Debt: What to Know
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