Section 523 of the bankruptcy code: The fundamentals of nondischargeability in consumer bankruptcy

American Bankruptcy Law Journal

Volumn 71, Issue 3, 1997, Pages 325-412

  Singer, George H ^a,b  

^a Lindquist and Vennum PLLP   (United States)

^b Natl Bankruptcy Review Commission   (United States)

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EID: 0347949089     PISSN: 00279048     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (474)

1. United States Dep't of Health & Human Servs. v. Smith, 807 F.2d 122, 123-24 (8th Cir. 1986) (citing Kokoszka v. Belford, 417 U.S. 642, 645-46 (1974)).
2. See Louisville Joint Stock Land Bank v. Radford, 295 U.S. 555, 582 (1935); Local Loan Co. v. Hunt, 292 U.S. 234, 244 (1934); Williams v. United States Fidelity & Guar. Co., 236 U.S. 549, 554-55 (1915); Neal v. Clark, 95 U.S. 704, 709 (1877). One of the primary purposes of the bankruptcy [law] is to "relieve the honest debtor from the weight of oppressive indebtedness, and permit him to start afresh free from the obligations and responsibilities consequent upon business misfortunes." This purpose . . . has again and again been emphasized by the courts as being of public as well as private interest, in that it gives to the honest but unfortunate debtor . . . a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of pre-existing debt. Hunt, 292 U.S. at 244 (quoting Williams, 236 U.S. at 554-55).
3. See 11 U.S.C. §§ 524, 727(a) (1994). Sec also S. REP. NO. 95-989, at 7 (1978), reprinted in 1978 U.S.C.C.A.N. 5787, 5793 (indicating that at the very heart of the fresh start provisions, lies the § 727 discharge).
4. Section 727(b) provides: "Except as provided in section 523 of this title, a discharge . . . discharges the debtor from all debts that arose before the date of the order for relief under this chapter . . . ." 11 U.S.C. § 727(b). Section 524(a), which applies to all cases under all chapters, sets forth the effect of a discharge: (a) A discharge in a case under this title - (1) voids any judgment at any time obtained, to the extent that such judgment is a determination of personal liability of the debtor with respect to any debt discharged under section 727, 944, 1141, 1228, or 1328 of this title, whether or not discharge of such debt is waived; (2) operates as an injunction against the commencement or continuation of an action, the employment of process, or an act, to collect, recover or offset any such debt as a personal liability of the debtor, whether or not discharge of such debt is waived; and (3) operates as an injunction against the commencement or continuation of an action, the employment of process, or an act, to collect or recover from, or offset against, property of the debtor of the kind specified in section 541(a)(2) of this titled that is acquired after the commencement of the case . . . . Id. § 524(a) (emphasis added). It is significant to note that, since § 524(a) refers to the debtor's "personal liability," an in rem judgment based upon a prepetition lien against property of the debtor is unaffected by the bankruptcy discharge and may be enforced after the discharge. See Johnson v. Home State Bank, 501 U.S. 78, 83 (1991) (citing Long v. Bullard, 117 U.S. 617 (1886)) (noting that the right to foreclose on a prepetition lien survives or passes through bankruptcy unaffected by the bankruptcy discharge). See also St. Luke's Hosps. of Fargo, Inc. v. Smith (In re Smith), 119 B.R. 714, 720 (Bankr. D.N.D. 1990) (indicating that a discharge does not prevent the enforcement of valid liens in any way, but merely serves as a bar against suing the debtor personally for unpaid, prepetition debt).
5. Although the Article attempts to be relatively comprehensive in its discussion and analysis of some of the most important provisions in consumer bankruptcy, it is by no means exhaustive. The Article does not address some of the more esoteric provisions of § 523 and necessarily omits discussion of several important issues.
6. See 11 U.S.C. §§ 101-1330, as amended by Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, 108 Stat. 4106.
7. U.S. CONST. an. I, § 8, cl. 4.
8. James Stevens Rogers, The Impairment of Secured Creditors' Rights in Reorganization: A Study of the Relationship Between the Fifth Amendment and the Bankruptcy Clause, 96 HARV. L. REV. 973, 973-74 (1983).
9. See, e.g., 11 U.S.C. §§ 502, 522.
10. 28 U.S.C. § 157(b)(2)(I) (1994).
11. See 11 U.S.C. § 523(c)(1).
12. FED. R. BANKR. P. 4007 (Advisory Committee Note). See, e.g., Siragusa v. Siragusa (In re Siragusa), 27 F.3d 406, 408 (9th Cir. 1994) (indicating that state and federal courts have concurrent jurisdiction to determine the issue of nondischargeability under § 523(a)(5)); Goss v. Goss, 722 F.2d 599, 604 (10th Cir. 1983); Kaylo v. Kaylo (In re Kaylo), 183 B.R. 557, 559 (Bankr. W.D. Ark. 1995); Cross v. Cross (In re Cross), 175 B.R. 38, 40 n.1 (Bankr. D.N.D. 1994). Therefore, the issue of nondischargeability of certain debts may be initiated in another, and perhaps more favorable, forum after the bankruptcy.
13. FED. R. BANKR. P. 7001(6), 4007(e). The Bankruptcy Rules make most of the provisions of the Federal Rules of Civil Procedure applicable to adversary proceedings. See generally Honorable Christopher M. Klein, Bankruptcy Rules Made Easy: A Guide to the Federal Rules of Bankruptcy Procedure, 70 AM. BANKR. L.J. 301 (1996).
14. FED. R. BANKR. P. 4007(e). The Bankruptcy Rules bestow the right to file a complaint in order to obtain a determination of dischargeability under § 523 on the "debtor or any creditor." FED. R. BANKR. P. 4007(a).
15. See FED. R. EVID. 1101(a).
16. FED. R. BANKR. P. 4007(c). The conversion of a bankruptcy case from Chapter 11, 12, or 13 to a case under Chapter 7 restarts the time period for filing a complaint to determine the dischargeability of a debt. FED. R. BANKR. P. 1019(2). See, e.g., F & M Marquette Nat'l Bank v. Richards, 780 F.2d 24, 25-26 (8th Cir. 1985).
17. See FED. R. BANKR. P. 4007(c) ("On motion of any party in interest, after hearing on notice, the court may for cause extend the time fixed . . . [for filing a complaint under § 523(c)]. The motion shall be made before the time has expired.") (emphasis added). See also Newton v. Newton (In re Newton), No. 93-16788, 1995 WL 251136 *2 (9th Cir. 1995) (indicating that the correct standard for "cause" in Rule 4007(c) necessitates an examination of whether granting the extension would prejudice the debtor, the length of the delay, and the impact of the delay upon court administration).
18. 11 U.S.C. § 523(c)(1) (1994). See S. REP. NO. 95-989, at 80 (1978), reprinted in 1978 U.S.C.C.A.N. 5787, 5866 (indicating that if a creditor does not initiate a proceeding in bankruptcy court to determine the dischargeability of a debt of a kind specified in § 523(c)(1), "the debt is discharged"). Since § 523(c)(1) and the time parameters of Bankruptcy Rule 4007 for filing a complaint do not apply to creditors that have no notice or actual knowledge of the bankruptcy case, there is clearly a premium for assuring that all creditors are listed on the debtor's schedules with accurate addresses. It is significant to note, however, that the section, when read in conjunction with paragraph (a)(3)(B), does not require that a creditor have particularized notice or knowledge of the bar date for prosecuting a nondischargeability action but, rather, permits general knowledge of the bankruptcy case to suffice. See, e.g., GAC Enters., Inc. v. Medaglia (In re Medaglia), 52 F.3d 451, 455 (2d Cir. 1995); Walker v. Wilde (In re Walker), 927 F.2d 1138, 1144 (10th Cir. 1991); Yukon Self Storage Fund v. Green (In re Green), 876 F.2d 854, 856-57 (10th Cir. 1989); Neely v. Murchison, 815 F.2d 345, 347 (5th Cir. 1987) (concluding that creditors having notice of the bankruptcy case must affirmatively act in order to protect their rights). But see Reliable Elec. Co. v. Olson Constr. Co., 726 F.2d 620 (10th Cir. 1984) (concluding that one phone call concerning the existence of the bankruptcy case was insufficient to give the creditor notice). For an analysis of § 523(a)(3), see infra notes 198-223 and accompanying text.
19. FED. R. BANKR. P. 4007(b) ("A complaint other than under § 523(c) may be filed at any time. A case may be reopened without payment of an additional filing fee for the purpose of filing a complaint to obtain a determination under this rule.").
20. See, e.g., Classic Auto Refinishing, Inc. v. Marino (In re Marino), 37 F.3d 1354, 1358 (9th Cir. 1994) (noting that although courts have in dicta acknowledged a narrow exception to the time parameters of Rule 4007(c) based upon equitable grounds, any such exception is limited to situations in which the court misleads a party); J.E. Nicholson, Jr. v. Isaacman (In re Isaacman), 26 F.3d 629, 632 (6th Cir. 1994) (holding that a bankruptcy court may exercise its equitable powers to extend the bar date where the error was made by the court and was reasonably relied upon by the creditor); Anwiler v. Patchett (In re Anwiler), 958 F.2d 925, 928-29 (9th Cir.), cert. denied, 506 U.S. 882 (1992); Allied Fidelity Ins. Co. v. Reichmeier (In re Reichmeier), 130 B.R. 539, 540-41 (Bankr. W.D. Mo. 1991); Indus. Fin. Corp. v. Falk (In re Falk), 96 B.R. 901, 906-09 (Bankr. D. Minn. 1989).
21. FED. R. BANKR. P. 9006(b)(3) (explicitly excepting Rule 4007(c) from the "excusable neglect" standard and permitting enlargement "only to the extent and conditions" set forth in Rule 4007). See Kelly v. Gordon (In re Gordon), 988 F.2d 1000, 1001 (9th Cir. 1993) (per curiam); Ichinose v. Homer Nat'l Bank (In re Ichinose), 946 F.2d 1169, 1172-73 (5th Cir. 1991) (rejecting the excusable neglect argument); Hanson v. Walgamuth (In re Walgamuth), 144 B.R. 465, 467 (Bankr. D.S.D. 1992) (ruling that deadline in Rule 4007(c) must be strictly enforced); New York Dep't of Social Servs. v. Perrin (In re Perrin), 55 B.R. 401, 403 (Bankr. D.N.D. 1985) (concluding that the prescribed period is absolute). See also Taylor v. Freeland & Kronz, 503 U.S. 638,643-44 (1992) (opining that violations of deadlines provided for in the Bankruptcy Rules should not be excused even if they lead to unwelcome results); United States v. Locke, 471 U.S. 84, 100-01 (1985) ("Filing deadlines, like statutes of limitations, necessarily operate harshly and arbitrarily with respect to individuals who [may] fall on the other side of them, but if the concept of a filing deadline is to have any content, the deadline must be enforced. 'Any less rigid standard would risk encouraging a lax attitude toward filing dates.'") (citation omitted).
22. Austin Farm Ctr., Inc. v. Harrison (In re Harrison), 71 B.R. 457, 459 (Bankr. D. Minn. 1987).
23. The language of Bankruptcy Rule 4007 clearly specifies that a complaint must be filed within the specified time parameters, so that merely mailing it to the clerk of court by the deadline is not sufficient. See New Boston Dev. Co. v. Toler (In re Toler), 999 F.2d 140, 141-42 (6th Cir. 1993); Perrin, 55 B.R. at 402-03; Williston Coop. Credit Union v. Horob (In re Horob), 54 B.R. 693, 695-96 (Bankr. D.N.D. 1985); Hasbrouck v. Valeu (In re Valeu), 53 B.R. 549, 552 (Bankr. D.N.D. 1985). On the other hand, the actual delivery of the complaint to the clerk should usually constitute a filing even if it is not immediately docketed or served by the deadline. See Toler, 999 F.2d at 142; Kleiner v. Daboul (In re Daboul), 82 B.R. 657, 661 (Bankr. D. Mass. 1987); Valeu, 53 B.R. at 552.
24. FED. R. BANKR. P. 4007(c) (emphasis added). See 11 U.S.C. § 341 (1994).
25. See Gordon, 988 F.2d at 1001 (rejecting an argument that the time for filing a complaint under § 523 begins running on the date the first meeting is actually held); F & M Marquette Nat'l Bank v. Richards, 780 F.2d 24, 25 (8th Cir. 1985); Patchett v. Anwiler (In re Anwiler), 115 B.R. 661, 663 (BA.P. 9th Cir. 1990), aff'd, 958 F.2d 925 (9th Cir 1992); European-American Bank v. Hill (In re Hill), 48 B.R. 323, 325 (N.D. Ga. 1985); In re Manuel, 67 B.R. 825, 826 (Bankr. E.D. Mich. 1986). But see Allegheny Int'l Credit Corp. v. Bowman, 60 B.R. 423, 424-25 (S.D. Tex. 1986) (adopting a flexible view); Peerless Ins. Co v. Miller (In re Miller), 182 B.R. 507, 510 (Bankr. S.D. Ohio 1995) (indicating that the sixty-day period begins to run on the date the first meeting of creditors actually took place). Cf. Fair City Enters., Inc. v. Keefe (In re Keefe), 48 B.R. 717, 718-19 (Bankr. D.S.D. 1985) (concluding that the time period does not begin to run until the first meeting of creditors at which the debtor appears).
26. Compare FED. R. BANKR. P. 4007(c) (providing that the deadline for objecting to the dischargeability of those debts specified in § 523(c)(1) is sixty days following the "first date set" for the meeting of creditors), with FED. R. BANKR. P. 4003(b) (providing that the deadline for objecting to the debtor's claim of exemptions is thirty days "after the conclusion" of the meeting of creditors) (emphasis added).
27. See generally Allred v. Kennerley (In re Kennerley), 995 F.2d 145, 146-47 (9th Cir. 1993) (rejecting the argument that a motion for relief from the automatic stay should be considered a motion to extend the deadline for an extension of time under Rule 4007(c)).
28. Honorable Nancy C. Dreher & Matthew E. Roy, Bankruptcy Fraud and Nondischargeability Under Section 523 of the Bankruptcy Code, 69 N.D. L. REV. 57, 61-62 (1993).
29. See, e.g., Boyce v. Greenway (In re Greenway), 71 F.3d 1177, 1180 n.8 (5th Cir.), cert. denied, 116 S. Ct. 2499 (1996); Hagan v. McNallen (In re McNallen), 62 F.3d 619, 625 (4th Cir. 1995); Santa Fe Medical Servs., Inc. v. Segal (In re Segal), 57 F.3d 342, 346 (3d Cir. 1995); Century 21 Balfour Real Estate v. Menna (In re Menna), 16 F.3d 7, 9 (1st Cir. 1994); Werner v. Hoffman, 5 F.3d 1170, 1172 (8th Cir. 1993) (per curiam); Goldberg Sec., Inc. v. Scarlata (In re Scarlata), 979 F.2d 521, 524 (7th Cir. 1992).
30. Moreover, the Supreme Court has opined that: "In view of the well-known purposes of the bankrupt[cy] law, exceptions to the operation of a discharge thereunder should be confined to those plainly expressed," and not expanded in order to serve as a panacea for addressing any arguable wrong. Gleason v. Thaw, 236 U.S. 558, 562 (1915).
31. St. Laurent v. Ambrose (In re St. Laurent), 991 F.2d 672, 680 (11th Cir. 1993); Caspers v. Van Horne (In re Van Horne), 823 F.2d 1285,1287 (8th Cir. 1987); Jennen v. Hunter (In re Hunter), 771 F.2d 1126, 1130 (8th Cir. 1985). As stated by the Court of Appeals for the Eighth Circuit: "While we note that the underlying policy of the Bankruptcy Code is to give honest debtors a fresh start, we do not believe we need strictly construe the provisions of the Code in favor of dishonest debtors." Thul v. Ophaug (In re Ophaug), 827 F.2d 340, 343 (8th Cir. 1987). The view espoused by the Eighth Circuit is based on the notion that different considerations are applicable once a creditor has met the burden of establishing a debtor's dishonesty as to a specific debt. Vangelisti v. Kerbaugh (In re Kerbaugh), 159 B.R. 862, 869-70 (Bankr. D.N.D. 1993).
32. Brown v. Felsen, 442 U.S. 127, 128 (1979).
33. FED. R. BANKR. P. 4005.
34. Grogan v. Garner, 498 U.S. 279, 283-91 (1991) (rejecting the "clear and convincing" evidentiary standard for dischargeability proceedings under § 523(a)). A "preponderance of the evidence" has been defined to mean the greater weight of evidence: It is the evidence which, when weighed with that opposed to it has more convincing force and is more probably true and accurate. If upon any issue in the case, the evidence appears to be equally balanced, or if it cannot be said upon which side it weighs heavier, then plaintiff has not met his or her burden of proof. Smith v. United States, 726 F.2d 428, 430 (8th Cir. 1984).
35. First Nat'l Bank v. Pontow, 111 F.3d 604, 608 (8th Cir. 1997).
36. 124 CONG. REC. 11,089 (1978) (statement of Rep. Edwards), reprinted in 1978 U.S.C.C.A.N. 6436, 6453; id at 17,406 (statement of Sen. DeConcini), reprinted in 1978 U.S.C.C.A.N. 6505, 6522.
37. 11 U.S.C. § 523(a)(2) (1994).
38. 4 LAWRENCE P. KING ET AL., COLLIER ON BANKRUPTCY ¶ 523.08[1][e], at 523-44 (15th ed. rev. 1997).
39. See Neal v. Clark, 95 U.S. 704, 709 (1878). See also 124 CONG. REC. 32,399 (1978) (statement of Rep. Edwards) (expressing Congress's desire to incorporate the actual fraud standard into § 523(a)(2)(A)).
40. See Fowler Bros. v. Young (In re Young), 91 F.3d 1367, 1373 (10th Cir. 1996).
41. See Field v. Mans, 116 S. Ct. 437, 444 (1995); Mayer v. Spanel Int'l Ltd., 51 F.3d 670, 674 (7th Cir.), cert. denied, 116 S. Ct. 563 (1995); AT & T Universal Card Servs. v. Alvi (In re Alvi), 191 B.R. 724, 729 (Bankr. N.D. Ill. 1996).
42. See Barclays/Am. Bus. Credit, Inc. v. Adams (In re Adams), 31 F.3d 389, 393 n.1 (6th Cir. 1994); Caspers v. Van Horne (In re Van Horne), 823 F.2d 1285, 1288 (8th Cir. 1987).
43. Young, 91 F.3d at 1375; Van Horne, 823 F.2d at 1288; Blascak v. Sprague (In re Sprague), 205 B.R. 851, 859 (Bankr. N.D. Ohio 1997); Farraj v. Soliz (In re Soliz), 201 B.R. 363, 369 (Bankr. S.D.N.Y. 1996). A fundamental tenet of the common law of fraud is that it may be committed by the suppression of the truth as well as by an outright representation of fact. See Strong v. Repide, 213 U.S. 419 (1909).
44. Van Horne, 823 F.2d at 1288.
45. See Morimura, Arai & Co. v. Taback, 279 U.S. 24, 33 (1929) (finding under § 14 of the Bankruptcy Act that a "reckless indifference to the actual facts" is tantamount to an intentional misrepresentation); Brady v. McAllister (In re Brady), 101 F.3d 1165, 1172 (6th Cir. 1996); Arm v. A. Lindsay Morrison, M.D., Inc. (In re Arm), 87 F.3d 1046, 1049 (9th Cir. 1996); Norris v. First Nat'l Bank (In re Norris), 70 F.3d 27, 30-31 n.12 (5th Cir. 1995).
46. See generally Neal v. Clark, 95 U.S. 704 (1878).
47. See Williamson v. Busconi, 87 F.3d 602, 603 (1st Cir. 1996).
48. Cohen v. Kennedy (In re Kennedy), 108 F.3d 1015, 1018 (9th Cir. 1997).
49. "If a party does not rely on a fraudulent representation, the representation cannot be said to have produced an injury to be remedied." Federal Deposit Ins. Corp. v. Smith (In re Smith), 133 B.R. 800, 806 (N.D. Tex. 1991).
50. See City Bank & Trust Co. v. Vann (In re Vann), 67 F.3d 277 (11th Cir. 1995) (summarizing the positions of the circuits which interpreted the statute to require "actual," "justifiable" or "reasonable" reliance).
51. Field v. Mans, 116 S. Ct. 437, 446 (1995).
52. Id. at 444 (quoting RESTATEMENT (SECOND) OF TORTS § 545A cmt. b. (1977)).
53. Id. In rejecting the reasonableness standard in fraud cases in favor of a justifiability standard, the Supreme Court noted that "'the matter seems to turn upon an individual standard of the plaintiff's own capacity and the knowledge which he has, or which may fairly be charged against him from the facts within his observation in the light of his individual case.'" Id. (quoting W. PAGE KEETON ET AL., PROSSER AND KEETON ON THE LAW OF TORTS § 108, at 751 (5th ed. 1984)).
54. Id. at 446.
55. Id. Accord American Express Centurion Bank Optima v. Choi (In re Choi), 203 B.R. 397, 400 (Bankr. E.D. Va. 1996) (noting that the credibility of a witness becomes implicated by the fact that a person of ordinary care and intelligence would have recognized the falsity of the representation).
56. Field, 116 S. Ct. at 444.
57. Id.; Apte v. Japra (In re Apte), 96 F.3d 1319, 1322 (9th Cir. 1996). "Thus, if one induces another to buy a horse by representing it to be sound, the purchaser cannot recover even though the horse has but one eye, if the horse is shown to the purchaser before he buys it and the slightest inspection would have disclosed the defect. On the other hand, the rule stated in this Section applies only when the recipient of the misrepresentation is capable of appreciating its falsity at the time by the use of his senses. Thus a defect that any experienced horseman would at once recognize at first glance may not be patent to a person who has had no experience with horses." Field, 116 S. Ct. at 444 (quoting RESTATEMENT (SECOND) OF TORTS § 541 cmt. a (1977)).
58. RESTATEMENT (SECOND) OF TORTS § 545A cmt. a (1977).
59. See, e.g., F.C.C. National Bank v. Cacciatore (In re Cacciatore), 209 B.R. 609, 616 (Bankr. E.D.N.Y. 1997); Sanford Inst. for Sav. v. Gallo (In re Gallo), 208 B.R. 756, 759 (Bankr. D. Me. 1997).
60. See McCormick & Co. v. Childers, 468 F.2d 757, 768 (4th Cir. 1972) (finding under the common law that a party who began an investigation "was charged with [the] knowledge of everything that a proper investigation would disclose").
61. Caspers v. Van Horne (In re Van Horne), 823 F.2d 1285, 1288-89 (8th Cir. 1987).
62. United States v. Spicer, 57 F.3d 1152, 1157 (D.C. Cir. 1995), cert. denied, 116 S. Ct. 701 (1996); John Deere Co. v. Gerlach (In re Gerlach), 897 F.2d 1048, 1052 (10th Cir. 1990); Smith v. Young (In re Young), 208 B.R. 189, 200 (Bankr. S.D. Cal. 1997).
63. See supra note 62 (citing authority). See also RESTATEMENT (SECOND) OF TORTS § 546, at 102 (1977).
64. Young, 208 B.R. at 200 (quoting RESTATEMENT (SECOND) OF TORTS § 548A (1977)).
65. RESTATEMENT (SECOND) OF TORTS § 548A cmt. b (1977).
66. Id.
67. See generally Sears, Roebuck & Co. v. Hernandez (In re Hernandez), 208 B.R. 872, 879 (Bankr. W.D. Tex. 1997).
68. The Honorable A. Jay Cristol, Chief Judge of the United States Bankruptcy Court for the Southern District of Florida, has recently opined: Recent actions of credit card companies seeking to hold their debt non-dischargeable on the theory that the debtors' use of a card is a representation of debtors' ability to repay and thereafter non-payment constitutes a fraud which should deny dischargeability, is pure garbage. Credit card companies are obscene in their reckless issuance of "pre-approved" credit without any review or underwriting. They are unconscionable in their greedy lust for profits, charging 21%, 22%, even 23% interest. (Not many years ago, interest above 10% in Florida was a crime of usury.) 11 U.S.C. § 523 should be amended to provide that any credit extended, pre-approved, without request, and without submission of a financial statement, should be fully dischargeable in every instance. Undated Memorandum from the Honorabk A. Jay Cristol to the National Bankruptcy Review Commission (1997) (attaching AT & T Universal Card Servs. Corp. v. Ramirez (In re Ramirez), 184 B.R. 859 (Bankr. S.D. Fla. 1995) and AT & T Universal Card Servs. Corp. v. Valdes (In re Valdes), 1995 WL 619001 (Bankr. S.D. Fla. 1995)) (on file with the author and with the National Bankruptcy Review Commission, Washington, D.C.). Accord AT & T Universal Card Servs. Corp. v. Chinchilla (In re Chinchilla), 202 B.R. 1010, 1015-16 (Bankr. S.D. Fla. 1996).
69. See, e.g., Citicorp Credit Servs., Inc. v. Hinman (In re Hinman), 120 B.R. 1018 (Bankr. D.N.D. 1990). The Honorable William A. Hill, Judge for the United States Bankruptcy Court for the District of North Dakota, has found in at least one instance that: There are some who place blame for credit card defaults upon the industry and the seeming cavalier manner in which cards are issued to nearly anyone. While the industry may well be far too lax in its card issuance policies, this court does not believe that policy should in any respect lessen the degree of individual financial responsibility to be imposed upon credit card consumers. It is not the issuance or even possession of a card which results in the incredible number of credit card driven consumer bankruptcies. Rather, it is the unbridled and irresponsible use of credit by people who either have no cash flow consciousness in the first place, or who conveniently leave it at the curb side when entering a retail establishment that is at the root of the problem. To place blame on the card issuer is akin to moralizing over the crime of shoplifting by putting the retailer at fault for attractive merchandising efforts and for not stationing armed guards in every isle [sic]. Each person must accept responsibility for his or her own actions and be responsible for his or her own pocketbook. It is an unfortunate observation of modern society that the phrase, "I can't afford it" has become relegated to the unconscious mind of the American consumer. It is no dishonor to shop at K-Mart nor is it dishonorable to look at up-scale merchandise and conclude, "I can't afford it." Id. at 1023.
70. See Anastas v. American Sav. Bank (In re Anastas), 94 F.3d 1280, 1285 (9th Cir. 1996).
71. See generally 11 U.S.C. § 523(a)(2)(C) (1994) (creating a presumption of nondischargeability for certain credit card purchases made within sixty days of the order for relief). See also infra notes 148-158 and accompanying text (analyzing § 523(a)(2)(C)).
72. GM Card v. Cox (In re Cox), 182 B.R. 626, 630 (Bankr. D. Mass. 1995) (observing that the decisions are in disarray).
73. See MBNA Am. v. Simos (In re Simos), 209 B.R. 188, 191 (Bankr. M.D.N.C. 1997). A small number of courts have opined that a debtor's use of a credit card is not, by itself, a representation at all, express or implied. See, e.g., AT & T Universal Card Servs. v. Alvi (In re Alvi), 191 B.R. 724, 731 (Bankr. N.D. Ill. 1996); Cox, 182 B.R. at 636. That conclusion finds support from the decision of the United States Supreme Court in Williams v. United States, 458 U.S. 279, 284 (1982). The Court in Williams interpreted a criminal statute and concluded that delivering a check for which there were no funds was not a "false statement" since "a check is not a factual assertion at all." Id. Accord Goldberg Secs., Inc. v. Scarlata (In re Scarlata), 979 F.2d 521, 525 (7th Cir. 1992).
74. See, e.g., American Express Travel Related Servs., Co. v. Nahas (In re Nahas), 181 B.R. 930, 933 (Bankr. S.D. Ind. 1994); FCC Nat'l Bank v. Branch (In re Branch), 158 B.R. 475, 477 (Bankr. W.D. Mo. 1993); Hinman, 120 B.R. at 1021. "The intention to perform an agreement may be expressed but it is normally merely to be implied from the making of the agreement." When the card holder uses the card without an intent to repay, he has made a fraudulent representation to the card issuer. "A representation of the maker's own intent to do or not to do a particular thing is fraudulent if he does not have that intention." . . . "Since a promise necessarily carries with it the implied assertion of an intention to perform it follows that a promise made without such an intention is fraudulent and actionable in deceit." Anastas, 94 F.3d at 1285 (quoting RESTATEMENT (SECOND) OF TORTS § 530(1) & cmt. c (1977)) (citations omitted).
75. See, e.g., AT & T Universal Card Servs. Corp. v. Wong (In re Wong), 207 B.R. 822, 827 (Bankr. E.D. Pa. 1997); AT & T Universal Card Servs. Corp. v. Van Dyke (In re Van Dyke), 205 B.R. 587, 588 (Bankr. W.D. Mo. 1997); American Express Travel Related Servs. Co. v. McKinnon (In re McKinnon), 192 B.R. 768, 776 (Bankr. N.D. Ala. 1996); AT & T Universal Card Servs. Corp. v. Ramirez (In re Ramirez), 184 B.R. 859, 861 (Bankr. S.D. Fla. 1995); Norwest Bank Iowa, N.A. v. Larson (In re Larson), 136 B.R. 540, 544 (Bankr. D.N.D. 1992); Associated Dry Goods Co. v. Johnson (In re Johnson), 40 B.R. 756, 758 (Bankr. D. Minn. 1984).
76. See Sears, Roebuck & Co. v. Boydston (In re Boydston), 520 F.2d 1098, 1101 (5th Cir. 1975) (concluding that a fraudulent intent may be inferred if the debtor is hopelessly insolvent at the time of the purchase such that future payment is made impossible), cited with approval in First Deposit Credit Servs. Corp. v. Preece (In re Preece), 125 B.R. 474, 478 (Bankr. W.D. Tex. 1991); Southtrust Bank v. Moody (In re Moody), 203 B.R. 771, 774-75 (Bankr. M.D. Fla. 1996) ("It should not take a rocket scientist to figure out that even if [the debtor] lived 1,000 years she would still not be able to repay the charges she ran up on her credit cards.").
77. See, e.g., American Express Travel Related Servs. Co. v. Hashemi (In re Hashemi), 104 F.3d 1122, 1126 (9th Cir.), cert. denied, 117 S. Ct. 1824 (1997); Anastas, 94 F.3d at 1285; First U.S.A. Bank v. Hunter (In re Hunter), 210 B.R. 212, 216 (Bankr. MD. Fla. 1997) ("The availability of credit during financially difficult times is a very good reason to maintain credit. 'The test for nondischargeability is not whether credit was used in difficult times but whether the credit was used with the intent not to pay the debt.'"); MBNA America v. Simos (In re Simos), 209 B.R. 188, 191 (Bankr. M.D.N.C. 1997). Cf. Davison- Paxon Co. v. Caldwell, 115 F.2d 189 (5th Cir. 1940), cert. denied, 313 U.S. 564 (1941) (involving a one- on-one relationship between the debtor and creditor and holding that the Bankruptcy Act "does not except from discharge, debts created by obtaining credit through concealment of insolvency and present inability to pay").
78. See, e.g., F.C.C. v. Dobbins, 151 B.R. 509, 512 (W.D. Mo. 1992). One of the few circuit courts to address the issue of credit card fraud under § 523(a)(2)(A) held: [T]he focus should not be on whether the debtor was hopelessly insolvent at the time he made the credit card charges. A person on the verge of bankruptcy may have been brought to that point by a series of unwise financial choices, such as spending beyond his means, and if ability to repay were the focus of the fraud inquiry, too often would there be an unfounded judgment of non-dischargeability of credit card debt. Rather, the express focus must be solely on whether the debtor maliciously and in bad faith incurred credit card debt with the intention of petitioning for bankruptcy and avoiding the debt. . . . While we recognize that a view to the debtor's overall financial condition is a necessary part of inferring whether or not the debtor incurred the debt maliciously and in bad faith, . . . the hopeless state of a debtor's financial condition should never become a substitute for an actual finding of bad faith. Anastas, 94 F.3d at 1285-86 (citations omitted).
79. See 11 U.S.C. § 523(a)(2)(A) (1994).
80. See, e.g., Signet Bank v. Keyes, 1992 WL 66723 (10th Cir. 1992) (implying reliance on the part of the issuer since the element is inherent in the credit card system); J.C. Penney Co. v. Shanahan (In re Shanahan), 151 B.R. 44, 47-48 (Bankr. W.D.N.Y. 1993) (opining that the application of § 523(a)(2)(A) to credit card cases does not necessitate a resort to the "traditional five elements of fraud" under the common law); Citicorp Credit Servs., Inc. v. Hinman (In re Hinman), 120 B.R. 1018, 1022 (Bankr. D.N.D. 1990).
81. See generally supra note 80 (collecting cases).
82. See, e.g., Hashemi, 104 F.3d at 1126; Anastas, 94 F.3d at 1286.
83. See Household Credit Servs., Inc. v. Walters, 208 B.R. 651, 654 (Bankr. W.D. La. 1997).
84. See Shanahan, 151 B.R. at 47.
85. Hecht's v. Valdes (In re Valdes), 188 B.R. 533, 536 (Bankr. D. Md. 1995).
86. See Karelin v. Bank of Am. Nat'l Trust & Sav. Ass'n (In re Karelin), 109 B.R. 943, 947-48 (B.A.P. 9th Cir. 1990).
87. American Express Travel Related Servs. Co. v. Christensen (In re Christensen), 193 B.R. 863, 866 (N.D. Ill. 1996). "Seldom do the courts concern themselves with the debtor's ability to make the minimum monthly payment." G.M. Card v. Cox (In re Cox), 182 B.R. 626, 633 (Bankr. D. Mass. 1995) (emphasis added).
88. See 11 U.S.C. § 523(a)(2)(A) (1994). See also supra note 39 and accompanying text.
89. See American Express Travel Related Servs. Co. v. Hashemi (In re Hashemi), 104 F.3d 1122, 1125 (9th Cir.), cert. denied, 117 S. Ct. 1824 (1997). See also supra note 48 and accompanying text.
90. See, e.g., Citibank (South Dakota), N.A. v. Eashai (In re Eashai), 87 F.3d 1082, 1087-88 (9th Cir. 1996).
91. Hashemi, 104 F.3d at 1125.
92. Id.
93. See, e.g., First Deposit Nat'l Bank v. Pursley (In re Pursley), 158 B.R. 664, 668-69 (Bankr. N.D. Ohio 1993) (finding the required intent to deceive where the debtor took a $5,000 cash advance to pay other creditors). See also Chemical Bank v. Clagg (In re Clagg), 150 B.R. 697, 699 (Bankr. C.D. Ill. 1993) (finding a credit card obligation incurred for gambling to be nondischargeable); Sears, Roebuck & Co. v. Davis (In re Davis), 134 B.R. 990, 992 (Bankr. M.D. Fla. 1991).
94. See Chevy Chase Bank, FSB v. Briese (In re Briese), 196 B.R. 440, 448 (Bankr. W.D. Wis. 1996).
95. See, e.g., AT & T Universal Card Servs. Corp. v. Wong (In re Wong), 207 B.R. 822 (Bankr. E.D. Pa. 1997).
96. First Nat'l Bank v. Roddenberry, 701 F.2d 927, 932 (11th Cir. 1983) ("The element of risk is inherent in the issuance of bank credit cards. Our 'credit-card economy' encourages widespread voluntary risk- taking on the part of those issuing cards.").
97. See, e.g., Manufacturer's Hanover Trust Co. v. Ward (In re Ward), 857 F.2d 1082, 1085 (6th Cir. 1988); Roddenberry, 701 F.2d at 932 (applying the theory under the Bankruptcy Act of 1898); First Card Servs., Inc. v. Herndon (In re Herndon), 193 B.R. 595, 597-98 (M.D. Fla. 1996); Amerifirst Fed. Sav. & Loan Ass'n v. Solano (In re Solano), 85 B.R. 642, 643 (Bankr. S.D. Fla. 1988).
98. See, e.g., Chase Manhattan Bank v. Carpenter (In re Carpenter), 53 B.R. 724, 731 (Bankr. N.D. Ga. 1985). Accord 4 KING ET AL., supra note 38, ¶ 523.08[6], at 523-55 to 523-56 (embracing the assumption of risk approach over the implied representation theory).
99. Citibank S.D., N.A. v. Dougherty (In re Dougherty), 84 B.R. 653, 657 (B.A.P. 9th Cir. 1988).
100. Id. at 656.
101. See RESTATEMENT (SECOND) OF TORTS § 496A (1977). See also KEETOM ET AL., supra note 53, at § 108.
102. Household Credit Servs., Inc. v. Jacobs (In re Jacobs), 196 B.R. 429, 433 (Bankr. N.D. Ind. 1996).
103. Field v. Mans, 116 S. Ct. 437, 443 (1995). See supra notes 38-66 and accompanying text.
104. See, e.g., AT & T Universal Card Servs. Corp. v. Feld (In re Feld), 203 B.R. 360, 363 (Bankr. E.D. Pa. 1996); Chevy Chase Bank, FSB v. Briese (In re Briese), 196 B.R. 440, 449 (Bankr. W.D. Wis. 1996); Chase Manhattan Bank v. Murphy (In re Murphy), 190 B.R. 327, 331-32 (Bankr. N.D. Ill. 1995).
105. RESTATEMENT (SECOND) OF TORTS § 530(1) (1977).
106. Briese, 196 B.R. at 450. The approach to a fraudulent misrepresentation under the subjective theory can be made with reference to: Popeye's good friend Wimpy, who always promised, "I'll gladly pay you Tuesday" for a hamburger today. Wimpy is not guilty of fraud just because on Tuesday he doesn't have the money, or even if he was hopelessly insolvent when he made the promise. The common law notion of actual fraud requires that he have acted with an intent to deceive when he made the promise to pay; i.e., that when he told Popeye he would pay him back, he never intended to actually fork over the cash or otherwise acted recklessly. The situation is the same even if Popeye gives Wimpy a credit card to use in making the purchase. Id.
107. Id. at 452.
108. GM Card v. Cox (In re Cox), 182 B.R. 626, 629 (Bankr. D. Mass. 1995).
109. See Household Credit Servs., Inc. v. Jacobs (In re Jacobs), 196 B.R. 429, 434 (Bankr. N.D. Ind. 1996).
110. Briese, 196 B.R. at 448.
111. Id.
112. See generally Margaret Howard, The Credit Card Conundrum in Bankruptcy (on file with the Federal Judicial Center, Washington, D.C.).
113. 11 U.S.C. § 523(a)(2)(B) (1994).
114. See Valley Nat'l Bank v. Bush (In re Bush), 696 F.2d 640, 644 n.4 (8th Cir. 1983).
115. 11 U.S.C. § 523(a)(2)(B).
116. See Investors Credit Corp. v. Batie (In re Batie), 995 F.2d 85 (6th Cir. 1993); Engler v. Van Steinburg (In re Van Steinburg), 744 F.2d 1060 (4th Cir. 1984); Vangelisti v. Kerbaugh (In re Kerbaugh), 159 B.R. 862, 871 (Bankr. D.N.D. 1993) (indicating that a written statement does not have to be physically prepared by the debtor).
117. First Nat'l Bank v. Pontow, 111 F.3d 604, 609 (8th Cir. 1997); Van Steinburg, 744 F.2d at 1060-61 ("Congress did not speak in terms of financial statements. Instead it referred to a much broader class of statements - those respecting a debtor's . . . financial condition.").
118. See Von Steinburg, 744 F.2d at 1061. Contra 11 U.S.C. § 523(a)(2)(A).
119. 11 U.S.C. § 523(a)(2)(B)(i).
120. Miller v. Boles (In re Boles), 150 B.R. 733, 740 (Bankr. W.D. Mo. 1993).
121. First Interstate Bank v. Greene (In re Greene), 96 B.R. 279, 283 (B.A.P. 9th Cir. 1989), quoted with approval in Candland v. Insurance Co. (In re Candland), 90 F.3d 1466, 1470 (9th Cir. 1996).
122. 4 KING ET AL., supra note 38, ¶ 523.08[2][b], at 523-46. Accord Jordan v. Southeast Nat'l Bank (In re Jordan), 927 F.2d 221, 224 (5th Cir. 1991).
123. Jordan, 927 F.2d at 224; In re Bogstad, 779 F.2d 370, 375 (7th Cir. 1985) (opining that a statement is not materially false if the creditor would have made the loan in any event); Haxby v. National Boulevard Bank, 90 B.R. 340, 343 (N.D. Ill. 1988).
124. See Insurance Co. v. Cohn (In re Cohn), 54 F.3d 1108, 1114 (3d Cir. 1995).
125. See, e.g., Ramsey Nat'l Bank & Trust Co. v. Dammen (In re Dammen), 167 B.R. 545, 551 (Bankr. D.N.D. 1994). Cf. RESTATEMENT (SECOND) OF TORTS § 529 cmt. a (1977) (indicating that "a prospectus that accurately states the assets, bonded indebtedness and net earnings of a . . . corporation but omits any reference to its floating debt is a false representation of the financial position of the company").
126. Kaufman v. Tallant (In re Tallant), 207 B.R. 923, 934 (Bankr. E.D. Cal. 1997).
127. 11 U.S.C. § 523(a)(2)(B)(ii) (1994). See id. § 101(31) (defining the term "insider").
128. Id. § 523(a)(2)(B)(iv). A statement need not be made directly to the creditor or its representative in order to be rendered nondischargeable under § 523(a)(2)(B). It is sufficient if the creditor learns on of the statement indirectly as long as it acts in furtherance of it. See, e.g., Bell v. Stafos (In re Stafos), 666 F.2d 1343, 1346 (10th Cir. 1981), cert. denied, 456 U.S. 1007 (1982); Rogers v. Gardner, 226 F.2d 864, 867 (9th Cir. 1955).
129. National Union Fire Ins. Co. v. Bonnanzio (In re Bonnanzio), 91 F.3d 296, 301 (2d Cir. 1996); Investors Credit Corp. v. Batie (In re Batie), 995 F.2d 85, 90 (6th Cir. 1993); Bank One Lexington v. Woolum (In re Woolum), 979 F.2d 71, 73 (6th Cir. 1992), cert. denied, 507 U.S. 1005 (1993).
130. See, e.g., Vangelisti v. Kerbaugh (In re Kerbaugh), 159 B.R. 862, 872 (Bankr. D.N.D. 1993) (citing Household Fin. Corp. v. Howard (In re Howard), 73 B.R. 694, 703 (Bankr. N.D. Ind. 1987)).
131. Management Jets Int'l, Inc. v. Mutschler (In re Mutschler), 45 B.R. 482, 491 (Bankr. D.N.D. 1984).
132. 3 LAWRENCE P. KING ET AL., COLLIER ON BANKRUPTCY ¶ 523.10, at 523-72 (15th ed. 1993). Bankruptcy courts have been more apt to impose responsibility in connection with the use of written financial statements in cases where the debtor is intelligent, educated and experienced in financial matters. See generally Byrd v. Bank of Miss., 207 B.R. 131, 138 (S.D. Miss. 1997); Mutschler, 45 B.R. at 491-92 (citing authorities). The difficulty of ascertaining the debtor's state of mind often makes the credibility of the debtor as a witness a critical component of the analysis. See Norris v. First Nat'l Bank (In re Norris), 70 F.3d 27, 30-31 (5th Cir. 1995). See also Anderson v. City of Bessemer, 470 U.S. 564, 574 (1985) (noting on appeal that "[w]here there are two permissible views of the evidence, the fact finder's choice between them cannot be clearly erroneous").
133. There was no express reliance requirement under the statutory predecessor to § 523(a)(2)(B) as originally enacted. See Act of Feb. 5, 1903, ch. 487, 32 Stat. 797-98.
134. 11 U.S.C. § 523(a)(2)(B)(iii) (1994).
135. See Vangelisti v. Kerbaugh (In re Kerbaugh), 159 B.R. 862, 874 (Bankr. D.N.D. 1993).
136. 11 U.S.C. § 523(a)(2).
137. See Marx v. Reeds (In re Reeds), 145 B.R. 703, 707 (Bankr. N.D. Okla. 1992) (finding that the creditor's reliance on the false statement must be "'a contributory cause of the extension of credit'" (quoting Armstrong Rubber Co. v. Anzman (In re Anzman), 73 B.R. 156, 164 (Bankr. D. Colo. 1986)).
138. Phillips v. Napier (In re Napier), 205 B.R. 900, 906 (Bankr. N.D. Ill. 1997).
139. See, e.g., First Nat'l Bank v. Pontow, 111 F.3d 604, 609-10 (8th Cir. 1997).
140. 11 U.S.C. § 523(a)(2)(B)(iii).
141. National Union Fire Insur. Co. v. Bonnanzio (In re Bonnanzio), 91 F.3d 296, 305 (2d Cir. 1996); Thul v. Ophaug (In re Ophaug), 827 F.2d 340, 342-43 (8th Cir. 1987). See H.R. REP. NO. 95-595, at 129-30 (1977), reprinted in 1978 U.S.C.C.A.N. 5963, 6090-91 (describing creditor practices of intentionally obtaining false financial statements as a matter of convenience and, after the fact, commencing a § 523 action to avoid dischargeability).
142. Insurance Co. v. Cohn (In re Cohn), 54 F.3d 1108, 1117 (3d Cir. 1995); Wilmington Sav. Fund Soc. v. McKinley (In re McKinley), 207 B.R. 88, 92 (Bankr. E.D. Pa. 1997).
143. 4 KING ET AL., supra note 38, ¶ 523.08[2][d], at 523-48.
144. See, e.g., Sinclair Oil Corp. v. Jones (In re Jones), 31 F.3d 659, 662 (8th Cir. 1994).
145. H.R. REP. NO. 95-595, at 129-30 (1977), reprinted in 1978 U.S.C.CA.N. 5963, 6091-92.
146. La Trattoria, Inc. v. Lansford (In re Lansford), 822 F.2d 902, 904 (9th Cir. 1987) ("Having intentionally misled the sellers . . . it is unseemly for [the debtor] to now argue that he should be excused from section 523 because the sellers believed him."); Sovran Bank, NA. v. Allen (In re Allen), 65 B.R. 752, 762 (E.D. Va. 1986); First Am. Bank v. Bodenstein (In re Bodenstein), 168 B.R. 23, 31 (Bankr. E.D.N.Y. 1994); Commonwealth Land Title Insur. Co. v. Homer (In re Homer), 168 B.R. 790, 802 (Bankr. N.D. Ga. 1994); Pittsburgh Police Fed. Credit Union v. Lundy (In re Lundy), 165 B.R. 157, 163 (Bankr. W.D. Pa. 1994).
147. Management Jets Int'l, Inc. v. Mutschler (In re Mutschler), 45 B.R. 482, 493 (Bankr. D.N.D. 1984). The imposition of an absolute duty to verify "'requires the creditor to be wary of any applicant and to assume that the material within the statement is not accurate. Such a defensive posture will most certainly restrict the flow of credit.'" Kerbaugh v. Vangelisti (In re Kerbaugh), 159 B.R. 862, 874-75 (Bankr. D.N.D. 1993) (quoting Matthew D. Amhut, Section 523(a)(2)(B): Exceptions to Discharge for Fraudulently Obtained Loans, 5 BANKR. DEV. J. 151 (1987)).
148. The framers of § 523(a)(2)(C) opined: Excessive debts incurred within a short period prior to the filing of the petition present a special problem: that of "loading up" in contemplation of bankruptcy. A debtor planning [to] file a petition with the bankruptcy court has a strong economic incentive to incur dischargeable debts for either consumable goods or exempt property. In many instances, the debtor will go on a credit buying spree in contemplation of bankruptcy at a time when the debtor is, in fact, insolvent. Not only does this result in direct losses for the creditors that are victims of the spree, but it also creates a higher absolute level of debt so that all creditors receive less in liquidation. During this period of insolvency preceding the filing of the petition, creditors would not extend credit if they knew the true facts. S. REP. NO. 98-65, at 9 (1983).
149. 11 U.S.C. § 523(a)(2)(C) (1994). Section 523(a)(2)(C) provides: [F]or purposes of subparagraph (A) of this paragraph, consumer debts owed to a single creditor aggregating more than $1,000 for "luxury goods and services" incurred by an individual debtor on or within 60 days before the order for relief under this title, or cash advances aggregating more than $1,000 that are extensions of consumer credit under an open end credit plan obtained by an individual debtor on or within 60 days before the order for relief under this title are presumed to be nondischargeable; "luxury goods and services" do not include goods or services reasonably acquired for the support or maintenance of the debtor or a dependent of the debtor; an extension of consumer credit under an open end credit plan is to be defined for purposes of this subparagraph as it is defined in the Consumer Credit Protection Act [(15 U.S.C. §§ 1601-1693 (1994))]. Id. (emphasis added). The plain language of the statute makes clear that "aggregating" amounts owed to a single creditor is permissible. The presumption, while inapplicable if the value of the purchases are isolated and de minimis, is therefore applicable to a series of small purchases which, when added together, exceed $1,000.
150. The legislative history to an earlier attempt to address the problem contemplated by paragraph (C) of § 523(a)(2) reveals: Section 523 is amended and expanded to address a type of unconscionable or fraudulent debtor conduct not heretofore considered by the code - that of loading up. In many instances, a debtor will go on a credit buying spree in contemplation of bankruptcy. The new subsection (d) creates a rebuttable presumption that any debt incurred within the 40 days before the filing of the petition has been incurred under the circumstances that would make the debt dischargeable. Only that portion of a debt which was incurred within the 40-day time period is subject to this presumption. The burden is upon the debtor to demonstrate that the debt was not incurred in contemplation of a discharge in bankruptcy and thus a fraudulent debt. As the language makes clear, debts incurred for expenses reasonably necessary for support of the debtor and the debtor's dependents are not covered by the presumption. S. REP. NO. 98-65, at 58. Congress expanded the presumption period from forty to sixty days in the Bankruptcy Reform Act of 1994 in response to the problem of persisting credit card fraud. See Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, § 306, 108 Stat. 4106, 4135.
151. Chase Manhattan Bank, N.A. v. Sparks (In re Sparks), 154 B.R. 766, 768 (N.D. Ala. 1993) (quoting In re Orecchio, 109 B.R. 285, 290 (Bankr. S.D. Ohio 1989)).
152. Carroll & Sain v. Vernon (In re Vernon), 192 B.R. 165, 170 (Bankr. N.D. Ill. 1996); Norwest Fin. Consumer Discount Co. v. Koch (In re Koch), 83 B.R. 898, 903 (Bankr. E.D. Pa. 1988). Some courts have required a creditor to plead an action under § 523(a)(2)(C) in order for the presumption to be applied. See, e.g., Sparks, 154 B.R. at 768. Accord AT & T Universal Card Servs. Corp. v. Feld (In re Feld), 203 B.R. 360, 364 n.2 (Bankr. E.D. Pa. 1996). But see, e.g., Montgomery Ward & Co. v. Blackburn (In re Blackburn), 68 B.R. 870 (Bankr. N.D. Ind. 1987).
153. See generally Citibank, N.A. v. Eashai (In re Eashai), 87 F.3d 1082, 1092 (9th Cir. 1996) (noting that creditors do not get the benefit of the presumption of nondischargeability created by § 523(a)(2)(C) when credit card fraud is perpetrated by a debtor in a credit card kiting scheme because the timing of the fraudulent transactions can be manipulated to effectively eviscerate the statute).
154. 11 U.S.C. § 101(8) (defining "consumer debt" as any "debt incurred by an individual primarily for a personal, family, or household purpose").
155. See, e.g., Norwest Bank Iowa, NA. v. Larson (In re Larson), 136 B.R. 540, 543 (Bankr. D.N.D. 1992).
156. See, e.g., Aetna Fin. Co. v. Neal (In re Neal), 113 B.R. 607, 609 (BA.P. 9th Cir. 1990); Norwest Bank, NA. v. Orndorff (In re Orndorff), 162 B.R. 886, 888 n.2 (Bankr. N.D. Okla. 1994) (finding that the debtor's use of an access check during the presumption period in order to pay the balance due on another credit card not to be a "cash advance" as required by the statute); Beneficial of Mo., Inc. v. Shurbier (In re Shurbier), 134 B.R. 922, 927 (Bankr. W.D. Mo. 1991); ITT Financial Servs. Co. v. Woods (In re Woods), 66 B.R. 984, 989 (Bankr. E.D. Pa. 1986).
157. Luxury goods and services "do not include goods or services reasonably acquired for the support or maintenance of the debtor or a dependent of the debtor." 11 U.S.C. § 523(a)(2)(C).
158. See Carroll & Sain v. Vernon (In re Vernon), 192 B.R. 165, 170 (Bankr. N.D. Ill. 1996) ("Opinions dealing with the term 'luxury' in § 523(a)(2)(C) have . . . considered whether under circumstances of each particular case the purchases or transactions were 'extravagant,' 'indulgent,' or 'nonessential.'"); Bank One Lafayette, NA. v. Larisey (In re Larisey), 185 B.R. 877, 880 (Bankr. M.D. Fla. 1995) ("In determining if an item is a luxury good, one should consider whether the item purchased served any significant family function and whether the transaction evidenced some fiscal irresponsibility."). The statute is not clear as to whether an objective standard for determining what constitutes a luxury good is to be divined and applied or whether a more flexible, subjective standard which considers the debtor's relative socioeconomic position should be applied. See, e.g., Montgomery Ward & Co. v. Blackburn (In re Blackburn), 68 B.R. 870, 874 (Bankr. N.D. Ind. 1987) ("It is the debtor's immoderation on the eve of bankruptcy that creates the statutory presumption."); Sears, Roebuck & Co. v. Faulk (In re Faulk), 69 B.R. 743, 757 (Bankr. N.D. Ind. 1986); First Sec. Bank v. Davis (In re Davis), 56 B.R. 120, 121-22 (Bankr. D. Mont. 1985) (opining that whether purchases are necessities depends on the debtor's station in life). But see Trump Plaza Assocs. v. Poskanzer (In re Poskanzer), 143 B.R. 991, 1000 (Bankr. D.N.J. 1992) (opining that a "gambling" debt constituted a presumptively nondischargeable luxury good or service); Commercial Credit Corp. v. Hussey (In re Hussey), 59 B.R. 573, 575-76 (Bankr. M.D. Ala. 1986); Essex Bank v. Bono (In re Bono), 41 B.R. 629, 633-34 (Bankr. D. Mass. 1984) (a pre-§ 523(a)(2)(C) decision opining that purchases at exclusive establishments "can hardly be classified as necessities").
159. Punitive or exemplary damages are those damages awarded over and above that which would compensate a plaintiff for its actual loss and based upon the policy of punishing a wrongdoer and setting an example in situations where the conduct giving rise to a harm has been found to be willful or malicious. See BLACK'S LAW DICTIONARY 390 (6th ed. 1990).
160. See, e.g., Printy v. Dean Witter Reynolds, Inc., 110 F.3d 853, 857 (1st Cir. 1997); Bugna v. McArthur (In re Bugna), 33 F.3d 1054, 1058-59 (9th Cir. 1994) (distinguishing the dischargeability of punitive damages under § 523(a)(2), (4) and (6) for purposes of dischargeability); Johnson v. Miera (In re Miera), 926 F.2d 741, 745 (8th Cir. 1991) (finding punitive damages to be nondischargeable under § 523(a)(6) since both compensatory and noncompensatory damages stemmed from the same conduct).
161. See, e.g, Haile v. McDonald (In re McDonald), 73 B.R. 877, 882 (Bankr. N.D. Tex. 1987).
162. See, e.g., Palmer v. Levy (In re Levy), 951 F.2d 196, 198-99 (9th Cir. 1991), cert. denied, 504 U.S. 985 (1992); Ellwanger v. McBroom (In re Ellwanger), 105 B.R. 551, 556 (B.A.P. 9th Cir. 1989); Nguyen v. Van Quach (In re Van Quach), 187 B.R. 615, 622 (Bankr. N.D. Ill. 1995); Stokes v. Vierra, 173 B.R. 417, 418 (Bankr. N.D. Cal. 1994); Peterson v. Bozzano (In re Bozzano), 173 B.R. 990, 998 (Bankr. M.D.N.C. 1994); Havenstein v. Freeman (In re Freeman), 142 B.R. 758, 761 (Bankr. E.D. Va. 1991) ("Section 523(a)(2) is designed to recover what was actually lost from the creditor, not what the creditor expected to receive under the contract. Thus, . . . bankruptcy courts typically limit the § 523(a)(2) exception from discharge to compensatory damages and declare state court punitive damage awards dischargeable."); Larson v. Norris (In re Larson), 79 B.R. 462,465 (Bankr. W.D. Mo. 1987); McCullough v. Suter (In re Suter), 59 B.R. 944, 947 (Bankr. N.D. Ill. 1986). Accord 4 KING ET AL., supra note 38, ¶ 523.08[4], at 523-53 ("[T]he plain language of section 523(a)(2), as well as the narrow construction normally given to discharge exceptions, dictate that it should not apply to punitive damages.").
163. See 11 U.S.C. § 523 (a) (1994). The Bankruptcy Code defines a debt as a "liability on a claim." Id. § 101(12). A "debt" has a meaning that is coextensive with that of a "claim," which is broadly defined under the Code to mean a "right to payment." Id. § 101(5).
164. See, e.g., Cohen v. De La Cruz (In re Cohen), 106 F.3d 52, 56 (3d Cir. 1997); St. Laurent v. Ambrose (In re St. Laurent), 991 F.2d 672, 678 (11th Cir. 1993) ("A 'right to payment' is 'nothing more nor less than an enforceable obligation, regardless of the objectives . . . to [be] serve[d] in imposing the obligation.'") (quoting Pennsylvania Dep't of Pub. Welfare v. Davenport, 495 U.S. 552, 559 (1990)); FDIC v. Roberti (In re Roberti), 201 B.R. 614, 622-23 (Bankr. D. Conn. 1996); Sack v. Friedlander (In re Friedlander), 170 B.R. 472, 480 (Bankr. D. Mass. 1994); Kibler v. Winters (In re Winters), 159 B.R. 789, 790 (Bankr. E.D. Ky. 1993).
165. Cohen, 106 F.3d at 59. "'But for' the act which gave rise to the nondischargeable debt, there would be no liability for [noncompensatory damages] . . . . To discharge ancillary debt which would not exist but for a non-dischargeable debt seems erroneous." Freer v. Weinstein (In re Weinstein), 173 B.R. 258, 272, 274-75 (Bankr. E.D.N.Y. 1994).
166. Cohen, 106 F.3d at 59 (quoting Grogan v. Garner, 498 U.S. 279, 287 (1991)). See Sullivan v. Clayton (In re Clayton), 195 B.R. 342, 349 (Bankr. E.D. Pa. 1996) (recounting the legislative development of the statute and suggesting that Congress recognized that the dischargeability of punitive damages was tied to the dischargeability of compensatory damages).
167. 66 U.S.L.W. 3201, 3203 (U.S. Sept. 29, 1997).
168. See UNIF. PARTNERSHIP ACT §§ 11-15, 6 U.L.A. 438-508 (1995).
169. 114 U.S. 555 (1885).
170. Id.
171. See, e.g., BancBoston Mortgage Corp. v. Ledford (In re Ledford), 127 B.R. 175, 181-85 (M.D. Tenn. 1991), aff'd, 970 F.2d 1556 (6th Cir. 1992), cert. denied, 507 U.S. 916 (1993). Cf. Luce v. First Equip. Leasing Corp. (In re Luce), 960 F.2d 1277, 1282-83 (5th Cir. 1992) (imputing liability but ostensibly requiring a showing of a benefit).
172. See, e.g., Walker v. Citizens State Bank (In re Walker), 726 F.2d 452, 454 (8th Cir. 1984) (per curiam); Cory v. Futscher (In re Futscher), 58 B.R. 14, 17 (Bankr. S.D. Ohio 1985); Alden State Bank v. Anderson (In re Anderson), 29 B.R. 184, 191 (Bankr. N.D. Iowa 1983).
173. I73 See, e.g., Eppard v. Sestito (In re Sestito), 136 B.R. 602, 605 (Bankr. D. Mass. 1992); FDIC v. Calhoun (In re Calhoun), 131 B.R. 757, 760-62 (Bankr. D.D.C. 1991); Ledford, 127 B.R. at 180-85; Fluehr v. Paolino (In re Paolino), 75 B.R. 641, 645-50 (Bankr. E.D. Pa. 1987).
174. Steven H. Resnicoff, Is it Morally Wrong to Depend on the Honesty of Your Partner or Spouse? Bankruptcy Dischargeability of Vicarious Debt. 42 CASE W. RES. L. REV. 147 (1992).
175. See, e.g., Jones v. Whitacre (In re Whitacre), 93 B.R. 584, 585 (Bankr. N.D. Ohio 1988) (refusing to impute a child's intent to parents); Thatcher v. Austin (In re Austin), 36 B.R. 306, 311-12 (Bankr. M.D. Tenn. 1984) (opining that there is nothing in the legislative history of § 523 to suggest that the nonbankruptcy law vicarious liability rule should be "appended to the statutory exceptions to discharge in bankruptcy"); Ordmann v. Hoppa (In re Hoppa), 31 B.R. 753, 754-55 (Bankr. E.D. Wis. 1983) (finding that an employer's obligation for the drunk driving liability of his employee is dischargeable). But see, e.g., McIntyre v. Kavanaugh, 242 U.S. 138 (1916); Impulsora Del Territorio Sur, S.A. v. Cecchini (In re Cecchini), 780 F.2d 1440, 1444 (9th Cir. 1986) (imputing a partner's knowledge and intent to debtor under § 523(a)(6)); Bear, Stearns & Co. v. Powell (In re Powell), 95 B.R. 236, 240 (Bankr. S.D. Fla.), aff'd, 108 B.R. 343 (S.D. Fla. 1989), aff'd, 914 F.2d 268 (11th Cir. 1990). The plain language of § 523(a)(2)(B) and (C) should resolve any question with respect to the imputation of liability under those provisions since a specific reference is made to the conduct of the "debtor." Additionally, paragraphs (B) and (C) of § 523(a)(2) of the Code have no statutory predecessor.
176. Indeed, Congress believed that the mere threat of litigation over a § 523(a)(2) action and its attendant costs would frequently be sufficient to "induce the debtor to settle for a reduced sum, in order to avoid the costs of litigation. Thus, creditors with marginal cases are usually able to have at least part of their claim excepted from discharge (or reaffirmed), even though the merits of the case are weak." H.R. REP. NO. 95-595, at 131 (1977), reprinted in 1978 U.S.C.C.A.N. 5963, 6092.
177. Id. at 130, 365, reprinted in 1978 U.S.C.C.A.N. 5963, 6091, 6321; S. REP. NO. 95-989, at 80 (1978), reprinted in 1978 U.S.C.C.A.N. 5787, 5866. If the debtor prevails, . . . the creditor is taxed costs and attorney's fees and may be taxed any actual pecuniary damages, such as a loss of a day's work, that the debtor might have suffered as a result of the litigation. The present pressure on the honest debtor to settle in order to avoid attorney's fees in litigation over a creditor-induced false statement is eliminated. The creditor is protected from dishonest debtors by the continuance of the exception to discharge. H.R. REP. NO. 95-595, at 131, reprinted in 1978 U.S.C.C.A.N. 5963, 6092.
178. See 11 U.S.C. § 523(d) (Supp. II 1978) (amended). The prior version of § 523(d) read: If a creditor requests a determination of dischargeability of a consumer debt under subsection (a)(2) of this section, and such debt is discharged, the court shall grant judgment against such creditor and in favor of the debtor for the costs of, and a reasonable attorney's fee for, the proceeding to determine dischargeability, unless such granting of judgment would be clearly inequitable. Id. The mandatory imposition of fees under the 1978 statute yielded only to a finding of clear inequity. See id. The legislative history to the original enactment indicates: The costs-attorney's fees provision is mandatory. If the provision were made permissive instead of mandatory, with discretion in the court to award such amounts as were proper in each particular case, the debtor would once again be subject to the risk of paying attorney's fees and losing a day's work without pay. . . . Making the provision discretionary would seriously weaken the protection it provides. H.R. REP. NO. 95-595, at 131-32, reprinted in 1978 U.S.C.C.A.N. 5963, 6092-93. See generally Thorp Credit, Inc. v. Carmen (In re Carmen), 723 F.2d 16, 18 (6th Cir. 1983); Lambrakis v. Jones (In re Jones), 49 B.R. 431, 436-37 (Bankr. D.D.C. 1985); W.A.F.B. Fed. Credit Union v. Fuerinsky (In re Fuerinsky), 41 B.R. 724, 729 (Bankr. D. Ariz. 1984).
179. The new standard appears to strike a more appropriate balance between debtor and creditor by protecting debtors from unreasonable challenges to dischargeability and deterring creditors from making such challenges, without creating a presumption that a particular creditor was not substantially justified simply because it did not prevail.
180. 11 U.S.C. § 523(d) (1994) (emphasis added). The language of the statute is drawn from the Equal Access to Justice Act, 28 U.S.C. § 2412(d)(1)(A), which governs the requests by litigants for attorneys' fees against the federal government. See S. REP. NO. 98-65, at 9-10 (1983).
181. Cf. Vasseli v. Wells Fargo Bank, N.A. (In re Vasseli), 5 F.3d 351, 353 (9th Cir. 1993) (noting that § 523(d) does not grant bankruptcy courts the authority to award the debtor attorneys' fees incurred in connection with appellate representation).
182. See Mercantile Bank v. Williamson (In re Williamson), 181 B.R. 403, 409 (Bankr. W.D. Mo. 1995). "Where . . . the debtor is not represented, he is similarly entitled to recover the costs incurred in preparing his own defense. Otherwise, creditors would bear no risk in bringing unjustified suits against the most vulnerable debtors, those without counsel." Id. 183 The costs and fees provision has no applicability to any of the other exceptions to discharge under § 523(a).
183. The statute makes clear that the costs and fees provision for debtors is applicable only to "consumer debts" under § 523(a)(2). A "consumer debt" is defined under the Code to mean any "debt incurred by an individual primarily for a personal, family, or household purpose." 11 U.S.C. § 101(8). The statute is therefore inapplicable, for instance, in credit card fraud cases when the expenditures were incurred predominantly for business-related purposes. See Citizens Nat'l Bank v. Burns (In re Burns), 894 F.2d 361, 363 (10th Cir. 1990); All Am. of Asburn, Inc. v. Fox (In re Fox), 725 F.2d 661, 662-63 (11th Cir. 1984); Ramsey Nat'l Bank & Trust Co. v. Dammen (In re Dammen), 167 B.R. 545, 554 (Bankr. D.N.D. 1994); First Int'l Bank v. Kerbaugh (In re Kerbaugh) 162 B.R. 255, 266 (Bankr. D.N.D. 1993).
184. Boatmen's Bank v. Holmes (In re Holmes), 169 B.R. 186, 191 (Bankr. W.D. Mo. 1994).
185. A.L. Lee Mem'l Hosp. v. McFadyen (In re McFadyen), 192 B.R. 328, 333 (N.D.N.Y. 1995); First Banks v. Goss (In re Goss) 149 B.R. 460, 462 (Bankr. E.D. Mich. 1992); Chrysler First Fin. Servs. Corp. v. Rhodes (In re Rhodes), 93 B.R. 622, 624 (Bankr. S.D. Ill. 1988).
186. Phillips v. Napier (In re Napier), 205 B.R. 900, 908 (Bankr. N.D. Ill. 1997). Although the denial of an award of costs and attorneys' fees is authorized on the ground of "special circumstances," this exception must be construed with reference to traditional equitable principles and does not serve "as a license to the bankruptcy judge to base decision on idiosyncratic notions of equity, fair dealing, or . . . family justice." In re Hingson, 954 F.2d 428, 429-30 (7th Cir. 1992).
187. See FED. R. BANKR. P. 9011.
188. Holmes, 169 B.R. at 191.
189. See, e.g., Ciancioso v. Ciancioso (In re Ciancioso), 187 B.R. 438, 444-45 (E.D.N.Y. 1995); Mercantile Bank v. Williamson (In re Williamson), 181 B.R. 403, 409 (Bankr. W.D. Mo. 1995) (noting that the language of § 523(d) is mandatory); First Nat'l Bank v. Bernhardy, 103 B.R. 198, 200 (Bankr. N.D. Ill. 1989); Thorp Credit, Inc. v. Smith (In re Smith), 54 B.R. 299, 303 (Bankr. S.D. Iowa 1985); Commercial Union Ins. Co. v. Sidore (In re Sidore), 41 B.R. 206, 209 (Bankr. W.D.N.Y. 1984). But see West Springfield M.E. Credit Union v. Finnie (In re Finnie), 21 B.R. 368, 371 (Bankr. D. Mass. 1982); Georgia Bank & Trust Co. v. McKinney (In re McKinney), 18 B.R. 607, 612 (Bankr. M.D. Ga. 1982).
190. FCC National Bank v. Dobbins, 151 B.R. 509, 1512 (W.D. Mo. 1992); A.L. Lee Mem'l Hosp., 192 B.R. at 334; Williamson, 181 B.R. at 408. See Pierce v. Underwood, 487 U.S. 552, 565 (1988) (interpreting the term "substantially justified" under 28 U.S.C. § 2412(d)(1)(A) to mean "justified to a degree that could satisfy a reasonable person"); Phillips v. Napier (In re Napier), 205 B.R. 900, 908 (Bankr. N.D. Ill. 1997) (indicating that the requirements for "substantial justification" are: "(1) a reasonable basis in law for the theory it propounds; (2) a reasonable basis in truth for the facts alleged; and (3) a reasonable connection between the facts alleged and the legal theory advanced"); First Bank v. Colvin (In re Colvin), 117 B.R. 484, 488 (Bankr. E.D. Mo. 1990) (opining that the test is one of "reasonableness"). See also American Express Travel Related Servs. Co. v. Christensen (In re Christensen), 193 B.R. 863, 867 (N.D. Ill. 1996) (affirming award of costs and fees to a debtor where the creditor's argument for nondischargeability was tenuous and it failed to establish all elements of its claim).
191. Williamson, 181 B.R. at 408.
192. Dreher & Roy, supra note 28, at 74-75. See Manufacturer's Hanover Trust Co. v. Hudgins, 72 B.R. 214, 221 (N.D. Ill. 1987); Beneficial of Mo., Inc. v. Shurbier (In re Shurbier), 134 B.R. 922, 928 (Bankr. W.D. Mo. 1991); Chevy Chase Fed. Sav. Bank v. Weinand (In re Weinand), Adv. No. 4-90-210,1991 WL 799 *2 (Bankr. D. Minn. Jan. 7, 1991). "A creditor is not justified in continuing to pursue a case once it learns that its position is not substantially justified, even if the suit was originally filed in good faith. Such a reading of the statute would all but emasculate the purpose of section 523(d). Creditors could always contend they thought they had a good case when they filed. Thus, the consumer debtor would be forced to settle rather than fight it out. No, we think better [sic] the construction of section 523(d) is that when a creditor learns that it will not be able to prove its case, but continues to pursue the case, it falls within the statute, and thus must pay the debtor's attorneys' fees and costs." Id. (quoting Hudgins, 72 B.R. at 221).
193. Key Bank v. Schalk (In re Schalk), 191 B.R. 522, 528 (Bankr. N.D.N.Y. 1995).
194. See 11 U.S.C. § 523(d) (1994) (requiring the court to grant judgment "in favor of the debtor") (emphasis added).
195. See H.R. REP. NO. 95-595, at 131 (1977), reprinted in 1978 U.S.C.C.A.N. 5963, 6092. The bill does not award the creditor attorney's fees if the creditor prevails. Though such a balance might seem fair at first blush, such a provision would restore the balance back in favor of the creditor by inducing debtors to settle no matter what the merits of their cases. In addition, the creditor is generally better able to bear the costs of the litigation than a bankrupt debtor, and it is likely that a creditor's attorney's fees would be substantially higher than a debtors, putting an additional disincentive on the debtor to litigate. Id. (emphasis added).
196. Compare Mayer v. Spanel Int'l, Ltd., 51 F.3d 670, 677 (7th Cir.) (opining that contractually-agreed upon attorneys' fees are no less a part of the debt than principal and interest; the perpetrator of a fraud cannot escape the consequences of their allowance), cert. denied, 116 S. Ct. 563 (1995), and Transouth Fin. Corp. v. Johnson, 931 F.2d 1505, 1509 (11th Cir. 1991), and Jordan v. Southeast Nat'l Bank (In re Jordan), 927 F.2d 221, 226-28 (5th Cir. 1991) (opining that creditors with a contractual right to attorneys' fees under state law should not have their claims treated differently under federal law simply because of the advent of bankruptcy), and Jennen v. Hunter (In re Hunter), 771 F.2d 1126, 1131 (8th Cir. 1985) (finding that "[a]ncillary obligations such as attorneys' fees and interest may attach to the primary debt; consequently, their status depends on that of the primary debt"), and Martin v. Bank of Germantown (In re Martin), 761 F.2d 1163, 1168 (6th Cir. 1985) (holding that there is no hint in § 523(d) that it was intended to operate to deprive creditors of the contractual right to attorneys' fees; to the contrary, § 523(a)(2) excepts the "whole of any debt" from the scope of the discharge), and Chase Manhattan Bank v. Birkland, 98 B.R. 35, 36 (W.D. Wash. 1988) (following Martin and reasoning that creditors give value for the right to recover attorney's fees as part of their claim), and First Commercial Bank v. Robinson (In re Robinson), 192 B.R. 569, 578 (Bankr. N.D. Ala. 1996), and First Int'l Bank v. Kerbaugh (In re Kerbaugh), 162 B.R. 255, 267 n.5 (Bankr. D.N.D. 1993), and Vangelisti v. Kerbaugh (In re Kerbaugh), 159 B.R. 862, 875 (Bankr. D.N.D. 1993), and Barnard v. Silva (In re Silva), 125 B.R. 28, 31-32 (Bankr. C.D. Cal. 1991); Lupin v. Ziegler (In re Ziegler), 109 B.R. 172, 176-77 (Bankr. W.D.N.C. 1989), and Goodnow v. Adelman (In re Adelman), 90 B.R. 1012,1024 (Bankr. D.S.D. 1988), with Multco Employees Credit Union v. Martin (In re Martin), No. 92-36679, 1994 WL 259420 *1-2 (9th Cir. Jan. 5, 1994) (indicating irrespective of a contractual provision, an award of attorney's fees to a prevailing creditor in a § 523 action would upset the balance Congress envisioned), and Grove v. Fulwiler, 624 F.2d 908, 910 (9th Cir. 1980) (Bankruptcy Act), and Itule v. Metlease, Inc. (In re Itule), 114 B.R. 206, 212-13 (B.A.P. 9th Cir. 1990), and Bank One Columbus, N.A. v. McDonald (In re McDonald), 177 B.R. 212, 218-19 (Bankr. E.D. Pa. 1994) (noting that the legislative history surrounding the enactment of § 523(d) is palpably inconsistent with an award of attorneys' fees despite the existence of "boilerplate language" in a contract), and AT & T Universal Card Servs. Corp. v. Bonniefield (In re Bonniefield), 154 B.R. 743, 745 (Bankr. N.D. Cal. 1993), and American Express Travel Related Servs. Co. v. King (In re King), 135 B.R. 734, 737-38 (Bankr. W.D.N.Y. 1992). A number of courts, including some of those cited above, have also drawn an analytical distinction between a request for the prepetition recovery of attorneys' fees and requests by a prevailing creditor for an award of fees for prosecuting the nondischargeability action. See, e.g., First Equip. Leasing Corp. v. Luce (In re Luce), 109 B.R. 202, 209-10 (Bankr. N.D. Tex. 1989).
197. 11 U.S.C. § 521(1). See FED. R. BANKR. P. 1007.
198. See Lubeck v. Littlefield's Restaurant Corp. (In re Fauchier), 71 B.R. 212, 215 (B.A.P. 9th Cir. 1987).
199. See, e.g., Beverly Lumber Co. v. Nicholson (In re Nicholson), 170 B.R. 153 (Bankr. W.D. Mo. 1994); Insurance Co. v. Faden (In re Faden), 170 B.R. 304, 308 (Bankr. S.D. Tex. 1994).
200. FED. R. BANKR. P. 1009(a). After the case is closed, a debtor must obtain court approval to reopen the case before a schedule can be amended. See 11 U.S.C. § 350.
201. It is important to remain cognizant of the fact that a debtor who "knowingly and fraudulently" omits creditors from his or her schedules runs the risk of a complete denial of a discharge. See 11 U.S.C. § 727(a)(4).
202. See H.R. REP. NO. 95-595, at 364 (1977), reprinted in 1978 U.S.C.C.A.N. 5963, 6320. See supra notes 16-28 and accompanying text (discussing the bar date for commencing nondischargeability actions). The Bankruptcy Reform Act of 1994 added paragraph (15) to § 523(a) and amended subsection (c)(1) to include that provision. Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, § 304(e), 108 Stat. 4106, 4133. Congress did not, however, add paragraph (15) to the enumerated obligations set forth in § 523(a)(3). This omission appears inadvertent. Nevertheless, the plain language of the statute does not afford protection to claimholders of § 523(a)(15) debts.
203. 11 U.S.C. § 523(a)(3)(A).
204. See, e.g., Judd v. Wolfe, 78 F.3d 110, 115 (3d Cir. 1996); Stone v. Caplan (In re Stone), 10 F.3d 285, 291 (5th Cir. 1994); Beezly v. Cal. Land Title Co. (In re Beezly), 994 F.2d 1433, 1434 (9th Cir. 1993) (per curiam); Soult v. Maddox (In re Soult), 894 F.2d 815, 817 (6th Cir. 1990); Samuel v. Baitcher (In re Baitcher), 781 F.2d 1529, 1534 (11th Cir. 1986); In re Adams, 41 B.R. 933, 934 (D. Me. 1984); In re Mendiola, 99 B.R. 864, 868 (Bankr. N.D. Ill. 1989). Section 727(b) of the Bankruptcy Code defines the scope of a debtor's discharge in bankruptcy. The statute provides that except as provided in § 523, a discharge releases the debtor "from all debts" that arose before the commencement of the case. 11 U.S.C. § 727(b) (emphasis added). The breadth of the discharge is comprehensive and makes no exception for omitted obligations. In re Stecklow, 144 B.R. 314, 317 (Bankr. D. Md. 1992). The courts have, however, divided on the issue of whether a case should be reopened to amend the schedules in order to include an omitted creditor. Compare Judd, 78 F.3d at 115, and Beezly, 994 F.2d at 1434 (allowing the debtor to amend his schedules after the case is closed is a "pointless exercise" as it has no legal consequence), with Rosinski v. Boyd (In re Rosinski), 759 F.2d 539, 542 (6th Cir. 1985), and Stark v. St. Mary's Hosp. (In re Stark), 717 F.2d 322, 324 (7th Cir. 1983) (per curiam) (permitting a debtor to reopen its case and amend its schedules if the omission was inadvertent). See Lauren A. Helbling & Honorable Christopher M. Klein, The Emerging Harmless Innocent Omission Defense to Nondischargeability Under Bankruptcy Code § 523(a)(3)(A): Making Sense of the Confusion Over Reopening Cases and Amending Schedules to Add Omitted Debts, 69 AM. BANKR. L.J. 33 (1995). The issue becomes important due to the often mistaken belief of some creditors and debtors that scheduling a debt impacts the determination of dischargeability. Some courts have shared this belief and permitted debtors to reopen their cases for the purpose of discharging the obligation. See, e.g., In re Smith, 68 B.R. 897, 899 (Bankr. N.D. Ill. 1987); LaBate & Conti, Inc. v. Davidson (In re Davidson), 36 B.R. 539, 541-42 (Bankr. D.N.J. 1983).
205. THe courts have made an exception in some cases where the debtor's failure to schedule the creditor was intentional, rather than inadvertent. See, e.g., Stone, 10 F.3d at 291.
206. A debtor who discovers the omission of a creditor from its schedules at any time during the pendency of the bankruptcy case may be able to prevent an otherwise dischargeable debt from becoming nondischargeable by filing an amended list or schedule. See supra note 201 and accompanying text. A prudent debtor should also take steps to personally notify an omitted creditor of the bankruptcy case. Although oral notification will suffice, a premium is placed on written documentation since the burden is on the debtor to prove timely notice or knowledge. See Stratton v. Hagan (In re Stratton), 29 B.R. 93 (Bankr. W.D. Ky. 1983).
207. 11 U.S.C. § 523(a)(3)(B).
208. See, e.g., Urbatek Sys., Inc. v. Lochrie (In re Lochrie), 78 B.R. 257, 259-60 (B.A.P. 9th Cir. 1987); In re David, 106 B.R. 126, 130 (Bankr. E.D. Mich. 1989); In re Padilla, 84 B.R. 194, 197 (Bankr. D. Colo. 1987); Robert S.C. Petersen, Inc. v. Anderson (In re Anderson), 72 B.R. 783, 788-89 (Bankr. D. Minn. 1987). These courts have further splintered on the issue of whether the bankruptcy court has exclusive jurisdiction over the proceeding or whether a state court has concurrent jurisdiction to make a determination of the issue. Compare In re Crawford, 183 B.R. 103 (Bankr. W.D. Va. 1995), with Fidelity Nat'l Title Ins. Co. v. Franklin (In re Franklin), 179 B.R. 913 (Bankr. E.D. Cal. 1995).
209. See, e.g., Haga v. National Union Fire Ins. Co. (In re Haga), 131 B.R. 320, 327 (Bankr. W.D. Tex. 1991); Chapins v. Peloso (In re Peloso), 107 B.R. 31, 33 (Bankr. S.D.N.Y. 1989); In re Dabbs, 72 B.R. 73, 74 (Bankr. N.D. Ala. 1987).
210. See, e.g., Converse v. Sarapas (In re Sarapas), 83 B.R. 195, 197 (Bankr. D. Mass. 1988); In re Zablocki, 36 B.R. 779, 782 (Bankr. D. Conn. 1984).
211. See Dollinger v. Poskanzer (In re Poskanzer), 146 B.R. 125, 129 (D.N.J. 1992).
212. 11 U.S.C. § 523(a)(3).
213. Poskanzer, 146 B.R. at 129.
214. See Small Bus. Ass'n v. Bridges, 894 F.2d 108, 112 (5th Cir. 1990) (per curiam).
215. See Ford Motor Credit Co. v. Weaver, 680 F.2d 451, 457 (6th Cir. 1982).
216. See Ramos v. Compton (In re Compton), 891 F.2d 1180, 1184 (5th Cir. 1990). See also supra note 18 and accompanying text.
217. See, e.g., Shockley v. Brown, 831 P.2d 1010 (Okla. Ct. App. 1992).
218. See, e.g., Compton, 891 F.2d at nn.10, 11; Lompa v. Price (In re Price), 871 F.2d 97, 99 (9th Cir. 1989); Byrd v. Alton (In re Alton), 837 F.2d 457, 460 (11th Cir. 1988) (per curiam).
219. Blackshear v. Layman (In re Layman), 131 B.R. 495, 497 (M.D. Fla. 1991).
220. See, e.g., Grossie v. Sam (In re Sam), 894 F.2d 778 (5th Cir. 1990) (holding that a technical compliance with notice rules was not necessary where the omitted creditor learned of the bankruptcy case eighteen days before the bar date); Compton, 891 F.2d at 1184-85; Price, 871 F.2d at 97 (opining that the creditor had actual notice in time to file an extension); Alton, 837 F.2d at 457; Neeley v. Murchison, 815 F.2d 345 (5th Cir. 1987) (finding the requisite knowledge to be sufficient if there is enough time to file for an extension of the bar date).
221. Manufacturers Hanover v. Dewalt (In re Dewalt), 961 F.2d 848, 850-51 (9th Cir. 1992).
222. Id.
223. 11 U.S.C. § 523(a)(4) (1994). Specifically, § 523(a)(4) excepts from the individual debtor's Chapter 7 discharge any debt "for fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny." Id. It is significant to note that the phrase "while acting in a fiduciary capacity" set forth in § 523(a)(4) only qualifies debts for "fraud or defalcation" and is not a qualification of all of the debts enumerated in the statute. Accordingly, those debts emanating from a debtor's "embezzlement" or "larceny" are nondischargeable regardless of whether or not the debtor was acting in the capacity of a fiduciary.
224. 5 See supra note 224.
225. Fowler Bros. v. Young (In re Young), 91 F.3d 1367, 1371-72 (10th Cir. 1996); Woodworking Enters., Inc. v. Baird (In re Baird), 114 B.R. 198, 202 (B.A.P. 9th Cir. 1990); ITT Life Ins. Corp. v. Haakenson (In re Haakenson), 159 B.R. 875, 887 (Bankr. D.N.D. 1993); Pacific-Midwest Gas Co. v. Hutton (In re Hutton), 117 B.R. 1009, 1010 (Bankr. N.D. Okla. 1990); Anderson v. Currin (In re Currin), 55 B.R. 928, 932 (Bankr. D. Colo. 1985); Reiten Equip., Inc. v. Wightman (In re Wightman), 36 B.R. 246, 251 (Bankr. D.N.D. 1984).
226. See, e.g., R.E. America, Inc. v. Garver (In re Garver), 116 F.3d 176, 179 (6th Cir. 1997) (adopting a narrow interpretation of the term "fiduciary"); Oppenheimer v. Reder (In re Reder), 60 B.R. 529, 539 (Bankr. D. Minn. 1986) (opining that the term "fiduciary" is "very limited under the Code"); Butts v. Butts (In re Butts), 46 B.R. 292, 294-95 (Bankr. D.N.D. 1985).
227. See Brown v. Felsen, 442 U.S. 127, 135 (1979); Brady v. McAllister (In re Brady), 101 F.3d 1165, 1173 (6th Cir. 1996); United Am. Ins. Co. v. Koelfgen (In re Koelfgen), 87 B.R. 993, 996 (Bankr. D. Minn. 1988). Express or technical trusts are generally created by a direct and positive act of the parties that, in writing, manifests an intention to impose a trust relationship. See Dan Porter Motors, Inc. v. Decker (In re Decker), 153 B.R. 997, 1000 (Bankr. D.N.D. 1993); Auto Owners Ins. Co. v. Littell (In re Littell), 109 B.R. 874, 884 (Bankr. N.D. Ind. 1989); Koelfgen, 87 B.R. at 996. See also Kinsler v. Pauley (In re Pauley), 205 B.R. 501, 513 (Bankr. W.D. Mich. 1997) (indicating that the requirements for an express trust are: "(1) a clearly defined [trust] res; (2) an unambiguous trust relationship; and (3) specific, affirmative duties undertaken by a trustee"). However, courts will look beyond labels used in a contract or other instrument to the substance of the relationship in order to determine its true nature. Davis v. Aetna Acceptance Co., 293 U.S. 328, 334 (1934) (ruling that the substance of the transaction makes clear that the relationship between the parties was merely that of debtor and creditor; "[t]he resulting obligation is not turned into one arising from a trust because the parties . . . have chosen to speak of it as a trust.").
228. Davis, 293 U.S. at 333 ("It is not enough that, by the very act of wrongdoing out of which the contested debt arose, the bankrupt has become chargeable as a trustee ex maleficio."); Barclays Am./Bus. Credit, Inc. v. Long (In re Long), 774 F.2d 875, 878 (8th Cir. 1985).
229. Davis, 293 U.S. at 333; Devaney v. Dloogoff (In re Dloogoff), 600 F.2d 166, 168 (8th Cir. 1979); Tudor Oaks Ltd. Partnership v. Cochrane (In re Cochrane), 179 B.R. 628, 632 (Bankr. D. Minn. 1995), aff'd, 124 F.3d 978 (8th Cir. 1997); Hensel v. Barker (In re Barker), 40 B.R. 356, 359 (Bankr. D. Minn. 1984). See Dreher & Roy, supra note 28, at 79 (noting that "the trust must be one which arises independently of, and without reference to, the act which gives rise to the debt").
230. 3 LAWRENCE P. KING ET AL., COLLIER ON BANKRUPTCY ¶ 523.14, at 523-92 (15th ed. 1995). [A] distinction must be made between a true fiduciary relationship and a relationship that is in reality a debtor-creditor arrangement. The concern here is that the definition of a fiduciary be narrowly construed so that it "not reach commercial debtor-creditor transactions in which the debtor merely violated the terms of his agreement with the creditor." Schwalbe v. Gans (In re Gans), 75 B.R. 474, 489 (Bankr. S.D.N.Y. 1987) (quoting In re Levitan, 46 B.R. 380, 385 (Bankr. E.D.N.Y. 1985)). Sec Bybee v. Geer (In re Geer), 137 B.R. 37, 40 (Bankr. W.D. Mo. 1991) (opining that, for purposes of § 523(a)(4), there is no fiduciary relationship between a managing partner and the members of the partnership).
231. See, e.g., Coburn Co. v. Nicholas (In re Nicholas), 956 F.2d 110, 112-14 (5th Cir. 1992) (construing state construction fund statute as creating fiduciary duties redressable by § 523(a)(4)); Long, 774 F.2d at 878 & n.3 (noting that a state statute, such as that which defines a corporate officer as a fiduciary of the corporation, may create the fiduciary relationship contemplated by § 523(a)(4)); In re Thomas, 729 F.2d 502, 504-05 (7th Cir. 1984); NP. Deoudes, Inc. v. Snyder (In re Snyder), 184 B.R. 473, 475 (D. Md. 1995) (setting forth the requirements for a statutorily created trust); Cochrane, 179 B.R. at 634 & n.15 (noting that a fiduciary need not always be a trustee under an express trust in order to give rise to a judgment of nondischargeability under § 523(a)(4)). But see, e.g., In re Marchiando, 13 F.3d 1111, 1116 (7th Cir. 1994) (finding that a statutory trust for the proceeds of unpaid lottery tickets did not create a fiduciary relationship within the meaning of the statute since the statute did not create "a true trust relationship but an added remedy for collection of debt").
232. See, e.g., Cochrane, 124 F.3d at 984; FDIC v. Mmahat, 907 F.2d 546, 550 (5th Cir. 1990), cert. denied, 499 U.S. 936 (1991); Kwiat v. Doucette, 81 B.R.
233. See, e.g., Black's, Inc. v. Decker (In re Decker), 36 B.R. 452, 457 (D.N.D. 1983); United Va. Bank v. Fussell (In re Fussell), 15 B.R. 1016, 1021 (W.D. Va. 1981).
234. See Dreher & Roy, supra note 28, at 80-81 & nn.122-133 (citing authority and giving other examples). See also Quaif v. Johnson, 4 F.3d 950, 953 (11th Cir. 1993) (insurance agent) (per curiam).
235. See R.E. America Inc. v. Garver (In re Garver), 116 F.3d 176 (6th Cir. 1997); Kaufman v. Tallant (In re Tallant), 207 B.R. 923, 930 (Bankr. E.D. Cal. 1997) (noting that certain attorney-client "business transactions" do not, without more, impose a trust relationship actionable by § 523(a)(4)).
236. See Neal v. Clark, 95 U.S. 704, 709 (1878). See also FED. R. BANKR. P. 7009(b) (requiring all averments of fraud or the circumstances constituting fraud to be pled with particularity).
237. See Clark, 95 U.S. at 709. See also G.W. White & Son, Inc. v. Tripp (In re Tripp), 189 B.R. 29, 35 (Bankr. N.D.N.Y. 1995); McDaniel v. Border (In re McDaniel), 181 B.R. 883, 886-87 (Bankr. S.D. Tex. 1994).
238. Otto v. Niles (In re Niles), 106 F.3d 1456, 1460 (9th Cir. 1997).
239. Pahlavi v. Ansari (In re Ansari), 113 F.3d 17, 20 (4th Cir. 1997).
240. Tallant, 207 B.R. at 929; Reliance Ins. Co. v. Wilson (In re Wilson), 127 B.R. 440, 443 (Bankr. E.D. Mo. 1991).
241. Carlisle Cashway, Inc. v. Johnson (In re Johnson), 691 F.2d 249, 256-57 (6th Cir. 1982) (Bankruptcy Act decision); Old Republic Sur. Co. v. Richardson (In re Richardson), 178 B.R. 19, 29 (Bankr. D.D.C. 1995).
242. J. O'Connor, CPO, Inc. v. Booker (In re Booker), 165 B.R. 164, 170-71 (Bankr. M.D.N.C. 1994); Reiten Equip., Inc. v. Wightman (In re Wightman), 36 B.R. 246, 251 (Bankr. D.N.D. 1984) ("With respect to embezzlement, the only question is whether [it] in fact occurred").
243. See Moore v. United States, 160 U.S. 268, 269 (1895); Transamerica Commercial Fin. Corp. v. Littleton (In re Littleton), 942 F.2d 551, 555 (9th Cir. 1991); First Nat'l Bank v. Phillips (In re Phillips), 882 F.2d 302, 304 (8th Cir. 1989); Belfry v. Cardozo (In re Belfry), 862 F.2d 661, 662 (8th Cir. 1988).
244. Great Am. Ins. Co. v. Graziano (In re Graziano), 35 B.R. 589, 594 (Bankr. E.D.N.Y. 1983).
245. See Werner v. Hoffman (In re Hoffman), 144 B.R. 459, 464 (Bankr. D.N.D. 1992), aff'd, 5 F.3d 1170 (8th Cir. 1993); Farina v. Balzano (In re Balzano), 127 B.R. 524, 533 (Bankr. E.D.N.Y. 1991).
246. Littfeton, 942 F.2d at 555. Accord RAI Credit Corp. v. Patton (In re Patton), 129 B.R. 113, 116 (Bankr. W.D. Tex. 1991); Lisk v. Criswell (In re Criswell), 52 B.R. 184, 201 (Bankr. E.D. Va. 1985).
247. Dreher & Roy, supra note 28, at 83-84- See, e.g., Weinreich v. Langworthy (In re Langworthy), 121 B.R. 903, 907 (Bankr. MD. Fla. 1990).
248. Although the statutory exceptions to dischargeability should normally be subject to a narrow construction, a number of courts have concluded that exceptions from discharge for child and spousal support are deserving of a more liberal construction since the policy underlying § 523(a)(5) favors the enforcement of support obligations over the debtor's fresh start. See, e.g., Holliday v. Kline (In re Kline), 65 F.3d 749, 750-51 (8th Cir. 1995).
249. The Bankruptcy Act of 1898 did not expressly except familial obligations from the bankruptcy discharge. The United States Supreme Court did, however, find that debts arising out of a husband's natural duty to support his wife and children were not dischargeable under the Act. See Audubon v. Shufeldt, 181 U.S. 575 (1901).
250. 11 U.S.C. § 523(a)(5) (1994).
251. See id. §§ 727(b), 1141(d)(2), 1228(a)(2), 1328(a)(2).
252. Id. § 523(a)(5)(B) (emphasis added). There is no real distinction between the terms "alimony," "maintenance," or "support" for bankruptcy purposes and the terms are used interchangeably by the federal courts and in this Article.
253. See Brody v. Brody (In re Brody), 3 F.3d 35, 38 (2d Cir. 1993). The distinction between "property" and "support" can, as a general matter, be easily articulated. An obligation stemming from a property division is usually premised upon each spouse's respective rights to an equitable share of property acquired during the marriage for their mutual benefit. Spousal support, by contrast, generally serves the functions of providing maintenance or rehabilitative support.
254. The interrelationship between support or property division becomes readily apparent when one considers the fact that a division of marital property is often employed by state courts as a substitute for alimony by providing a disadvantaged spouse with the means for rehabilitation and self support.
255. H.R. REP. NO. 95-595, at 364 (1977), reprinted in 1978 U.S.C.C.A.N. 5963, 6320; S. REP. NO. 95-989, at 79 (1978), reprinted in 1978 U.S.C.C.A.N. 5787, 5865.
256. See Williams v. Williams (In re Williams), 703 F.2d 1055, 1056 (8th Cir. 1983).
257. See Pauley v. Spong (In re Spong), 661 F.2d 6, 9 (2d Cir. 1981); Chambers v. Chambers (In re Chambers), 36 B.R. 42, 45 (Bankr. W.D. Wis. 1984), Reference to state law is necessary to the development of a federal standard for making determinations under § 523(a)(5) because there is no federal common law of domestic relations. However, a debt may be in the nature of support under § 523(a)(5) despite the fact that it may not legally qualify as support under state law. Gianakas v. Gianakas (In re Gianakas), 917 F.2d 759, 762 (3d Cir. 1990); Yeates v. Yeates (In re Yeates), 807 F.2d 874, 878 (10th Cir. 1986); Harrell v. Sharp (In re Harrell), 754 F.2d 902, 905 (11th Cir. 1985).
258. Most courts have ruled that the determination of the debt's true nature attaches irrevocably at the time of the divorce and that the circumstances existing at the time of the bankruptcy are irrelevant. In other words, if an award had the necessary features of support or property division at its inception, the obligation retains that character for bankruptcy purposes. See, e.g., Swate v. Hartwell (In re Swate), 99 F.3d 1282, 1286 (5th Cir. 1996); Gianakas, 917 F.2d at 762; Sylvester v. Sylvester, 865 F.2d 1164, 1166 (10th Cir. 1989); Forsdick v. Turgeon, 812 F.2d 801, 803-04 (2d Cir. 1987); Draper v. Draper, 790 F.2d 52, 54 (8th Cir. 1986) (holding that § 523(a)(5) does not contemplate an ongoing assessment of need as the circumstances of the parties change); Harrell, 754 F.2d at 906-07; Boyle v. Donovan, 724 F.2d 681, 683 (8th Cir. 1984) (opining that the parties' present situation should not be examined). Any other conclusion would, in effect, "result in a modification of an order of the divorce court and a usurpation of the state court's traditional role in establishing and modifying familial obligations." Sateren v. Sateren (In re Sateren), 183 B.R. 576, 581 (Bankr. D.N.D. 1995). But see Long v. Calhoun (In re Calhoun), 715 F.2d 1103, 1110 (6th Cir. 1983).
259. Friedkin v. Sternberg (In re Sternberg), 85 F.3d 1400, 1406 (9th Cir. 1996).
260. See, e.g., Sylvester, 865 F.2d at 1166; Benich v. Benich (In re Benich), 811 F.2d 943, 945 (5th Cir. 1987). See also 11 U.S.C. § 523(a)(5)(B) (1994).
261. The mere fact that a marital claimant previously reduced his or her claim to judgment does not preclude the bankruptcy court from examining the true nature of the obligation. Dennis v. Dennis (In re Dennis), 25 F.3d 274, 278 (5th Cir. 1994), cert. denied, 513 U.S. 1081 (1995).
262. See Sadowsky v. Larson (In re Larson), 169 B.R. 945, 953 (Bankr. D.N.D. 1994) (granting summary judgment in favor of the nondebtor spouse under § 523(a)(5)). [I]n circumstances in which the divorce decree and supporting court documents are so completely unambiguous . . . that the actual nature of the award and the intent of the court [or parties] is abundantly clear, it becomes unnecessary to engage in strict factors analysis. Any other rule would effectively turn a bankruptcy court into a court of domestic relations and inevitably force an unnecessary rehash, often years later, of the very same evidence that the state court carefully weighed when balancing the equities of the case and the respective needs and abilities of the parties to the dissolution proceeding. Id. (citations omitted).
263. See Shaver v. Shaver (In re Shaver), 736 F.2d 1314, 1316 (9th Cir. 1984) ("If an agreement fails to provide explicitly for spousal support, a court may presume that a so-called 'property settlement' is intended for support when the circumstances of the case indicate that the recipient spouse needs support.").
264. See, e.g., Boyle v. Donovan, 724 F.2d 681, 683 (8th Cir. 1984).
265. Fitzgerald v. Fitzgerald (In re Fitzgerald), 9 F.3d 517 (6th Cir. 1993); Morel v. Morel (In re Morel), 983 F.2d 104, 105 (8th Cir. 1992), cert. denied, 508 U.S. 943 (1993).
266. Sampson v. Sampson (In re Sampson), 997 F.2d 717, 723-24 (10th Cir. 1993); Singer v. Singer (In re Singer), 787 F.2d 1033, 1034-35 (6th Cir. 1986).
267. It is significant to note that a discharge in bankruptcy may be properly considered a "changed circumstance" warranting a modification to a support order. See Siragusa v. Siragusa (In re Siragusa), 27 F.3d 406, 408 (9th Cir. 1994).
268. See Friedkin v. Sternberg (In re Sternberg), 85 F.3d 1400, 1407 (9th Cir. 1996); Sampson, 997 F.2d at 724; Williams v. Williams (In re Williams), 703 F.2d 1055, 1057 (8th Cir. 1983).
269. See Coffman v. Coffman (In re Coffman), 52 B.R. 667, 672-73 (Bankr. D. Md. 1985).
270. Sternberg, 85 F.3d at 1406; Sylvester v. Sylvester, 865 F.2d 1164, 1166 (10th Cir. 1989).
271. See, e.g., Beaton v. Zerbe (In re Zerbe), 161 B.R. 939, 941 (E.D. Va. 1994); Clark v. Clark (In re Clark), 113 B.R. 797, 799 (S.D. Ga. 1990).
272. See 26 U.S.C. §§ 71, 215 (1994).
273. Sternberg, 85 F.3d at 1406.
274. See, e.g., Copeland v. Copeland (In re Copeland), 151 B.R. 907, 910 (Bankr. W.D. Ark. 1993).
275. See, e.g., Robb-Fulton v. Robb (In re Robb), 23 F.3d 895, 899 (4th Cir. 1994); Davidson v. Davidson (In re Davidson), 947 F.2d 1294, 1297 (5th Cir. 1991) ("To allow a spouse to set up an intricate and unambiguous divorce settlement, carefully distinguishing certain periodic payments, called alimony, from the division of marital property, and consistently taking advantage of this characterization for tax purposes, only then to declare that the payments truly represented a division of property, would be a legal affront to both the bankruptcy and tax codes.").
276. See 11 U.S.C. § 523(a)(15) (1994).
277. See infra notes 439-471 and accompanying text.
278. See 11 U.S.C. § 523(c). See, e.g, Puckett v. Puckett (In re Puckett), 206 B.R. 556, 560 (Bankr. W.D. Okla. 1997); In re Cannon, 203 B.R. 768, 770 (Bankr. M.D. Fla. 1996). See also supra notes 16-28 and accompanying text.
279. See 11 U.S.C. § 1328(a).
280. Id. § 523(a)(5) (emphasis added).
281. The legislative history of § 523(a)(5) signals that the identity of the payee of a post-marital obligation should be irrelevant to a determination of its dischargeability: "The [provision] . . . makes nondischargeable any debts resulting from an agreement by the debtor to hold the debtor's spouse harmless on joint debts to the extent that the agreement is in payment of alimony, maintenance or support of the spouse . . . ." S. REP. NO. 95-989, at 79 (1978), reprinted in 1978 U.S.C.C.A.N. 5787, 5865.
282. But see McCracken v. LaRue (In re LaRue), 204 B.R. 531, 534 (Bankr. E.D. Tenn. 1997).
283. See, e.g., Gianakas v. Gianakas (In re Gianakas), 917 F.2d 759, 763-64 (3d Cir. 1990). But see Fritz v. Daiker (In re Daiker), 5 B.R. 348, 351 (Bankr. D. Minn. 1980).
284. See, e.g., Macy v. Macy, 114 F.3d 1, 2 (1st Cir. 1997); Strickland v. Shannon (In re Strickland), 90 F.3d 444, 447 (11th Cir. 1996); Holliday v. Kline (In re Kline), 65 F.3d 749, 751 (8th Cir. 1995); Jones v. Jones (In re Jones), 9 F.3d 878, 881-82 (10th Cir. 1993); Silansky v. Brodsky, Greenblatt & Renehan (In re Silansky), 897 F.2d 743, 744 (4th Cir. 1990) (per curiam); Williams v. Williams (In re Williams), 703 F.2d 1055, 1057 (8th Cir. 1983).
285. See Leslie v. Hart (In re Leslie), 130 B.R. 817, 825 (Bankr. N.D. Ind. 1991).
286. 11 U.S.C. § 523(a)(6) (1994).
287. 4 KING ET AL., supra note 38, ¶ 523.12[2], at 523-92. Sec McIntyre v. Kavanaugh, 242 U.S. 138, 141 (1916) ("To deprive another of his property forever by deliberately disposing of it without semblance of authority is certainly an injury thereto within the common acceptation of the words."); Barclays Am./ Bus. Credit, Inc. v. Long (In re Long), 774 F.2d 875, 882 (8th Cir. 1985) (opining that debtors who willfully breach security agreements "are testing the outer bounds of their right to a fresh start"). See also S. REP. NO. 95-989, at 79 (1978), reprinted in 1978 U.S.C.C.A.N. 5787, 5865 (indicating that "debts for willful and malicious conversion or injury by the debtor to another entity or the property of another entity are nondischargeable").
288. Davis v. Aetna Acceptance Co., 293 U.S. 328, 332 (1934); Victor Fed. Sav. & Loan Ass'n v. Robison (In re Robison), 86 B.R. 182, 184 (Bankr. W.D. Mo. 1988). The fact that a debtor may have intended to remedy the harm resulting from a conversion is irrelevant to the analysis under § 523(a)(6). Universal Pontiac-Buick-GMC Truck, Inc. v. Routson (In re Routson), 160 B.R. 595, 607 (Bankr. D. Minn. 1993).
289. The phrase "willful and malicious" was first introduced to the law of nondischargeability in § 17a(2) of the Bankruptcy Act of 1898. See 11 U.S.C. § 17a(2) (1976) (repealed 1978).
290. See Long, 774 F.2d at 880-81.
291. Id. at 881.
292. H.R. REP. NO. 95-595, at 365 (1977), reprinted in 1978 U.S.C.C.A.N. 5963, 6320; S. REP. NO. 95-989, at 77-79 (1978), reprinted in 1978 U.S.C.C.A.N. 5787, 5865.
293. See Long, 774 F.2d 875 at 881.
294. See, e.g., Hope v. Walker (In re Walker), 48 F.3d 1161, 1164 (11th Cir. 1995). Malice "does not mean the same thing in Section 523(a) that it often does in other contexts." First Nat'l Bank v. Stanley (In re Stanley), 66 F.3d 664, 667 (4th Cir. 1995).
295. In Tinker v. Colwell, 193 U.S. 473 (1904), the United States Supreme Court set forth the basic standard which encompassed elements of both "willfulness and maliciousness" under the Bankruptcy Act. The Court ruled that: a willful disregard of what one knows to be his duty, an act which is against good morals and wrongful in and of itself, and which necessarily causes injury and is done intentionally, may be said to be done willfully and maliciously, so as to come within the exception [to discharge in bankruptcy]. Id. at 487. The Court further noted that a finding of special malice or malevolent purpose is not required. Id. at 490. Rather, the requisite malice could be implied from the action where one who performs the wrongful act knows of the harmful consequences or the surrounding circumstances indicate that such knowledge may be inferred. Id. Therefore, an implied or constructive malice standard could be derived from the very act itself. Id. at 485 ("[T]he act itself implies that degree of malice which is sufficient to bring the case within the exception stated in the statute."). A number of lower courts following Tinker found that the standard promulgated by the Court included acts rising to the level of recklessness as well as intentional acts. See, e.g., Harrison v. Donnelly, 153 F.2d 588, 591 (8th Cir. 1946) (finding that the statute could be satisfied upon a finding of a reckless disregard of duty). These courts thus applied a standard of recklessness to both the elements of "willfulness" and "maliciousness." When the Bankruptcy Code was revised in 1978, the words used in the exception remained unchanged. However, the legislative history indicates that: [t]o the extent that Tinker v. Colwell . . . held that a looser standard is intended, and to the extent that other cases have relied on Tinker to apply a "reckless disregard" standard, they are overruled. H.R. REP. NO. 95-595, at 365, reprinted in 1978 U.S.C.C.A.N. 5963, 6320. See also S. REP. NO. 95-989, at 79, reprinted in 1978 U.S.C.C.A.N. 5787, 5865. The courts under the Bankruptcy Code are divided on the issue of whether the quoted language was meant only to apply to the "willful" portion of the test or whether it should also be read to apply to the "malicious" portion of the test. See Chrysler Credit Corp. v. Rebhan, 842 F.2d 1257 (11th Cir. 1988).
296. The courts which embrace the narrow approach and require a showing of a specific intent to harm, explicitly or implicitly, interpret the legislative history to overrule the entire holding in Tinker. See, e.g., Grand Piano & Furniture Co. v. Hodges (In re Hodges), 4 B.R. 513, 516 (Bankr. W.D. Va. 1980) ("Without the Tinker standard, that leaves but one choice 'intent to do harm.'").
297. See Geiger v. Kawaauhau (In re Geiger), 113 F.3d 848, 852 (8th Cir.) (en banc), cert. granted, 66 U.S.L.W. 3201, 3203 (U.S. Sept. 29, 1997); Farmers Ins. Group v. Campos (In re Compos), 768 F.2d 1155 (10th Cir. 1985). Accord Hartley v. Jones (In re Hartley), 869 F.2d 394, 395 (8th Cir. 1989); Cassidy v. Minihan, 794 F.2d 340, 344 (8th Cir. 1986); United States v. Langer (In re Langer), 12 B.R. 957 (D.N.D. 1981); American Sav. & Loan Ass'n v. Weber (In re Weber), 99 B.R. 1001, 1014 (Bankr. D. Utah 1989); Ford Motor Credit Co. v. Gallaudet (In re Gallaudet), 46 B.R. 918, 927 (Bankr. D. Vt. 1985); Citizens Bank & Trust Co. v. Lewis (In re Lewis, 17 B.R. 46, 48 (Bankr. W.D. Ark. 1981); United Bank v. Nelson (In re Nelson), 10 B.R. 691, 692 (Bankr. N.D. Ill. 1981); Hodges, 4 B.R. at 516.
298. Long, 774 F.2d 875 at 881.
299. Geiger, 113 F.3d at 852 (quoting RESTATEMENT (SECOND) OF TORTS § 8A cmt. a, at 15 (1965)) (restricting the application of § 523(a)(6) to intentional torts, a legal category of harms that are based on "'the consequences of an act rather than the act itself'").
300. Conte v. Gautam (In re Conte), 33 F.3d 303, 305 (3d Cir. 1994); Long, 774 F.2d at 880-81; First Nat'l Bank v. Phillips (In re Phillips), 882 F.2d 302, 305 (8th Cir. 1989).
301. Skaarer v. Fercho (In re Fercho), 39 B.R. 764, 767 (Bankr. D.N.D. 1984) (quoting RESTATEMENT (SECOND) OF TORTS § 8a cmt. b (1965)) (emphasis added). See Long, 774 F.2d 875 at 881. See also Johnson v. Miera (In re Miera), 926 F.2d 741, 743-44 (8th Cir. 1991) (affirming the principles articulated in Long and concluding that the requisite intent may be established by circumstantial evidence).
302. See Geiger, 113 F.3d at 852-53. The debtor in Geiger, a medical doctor, was treating the creditor- patient for an infection associated with thrombophlebitis. The doctor prescribed oral penicillin. While on a business trip, the doctor left his patient in the care of other physicians who felt that it was necessary to administer intramuscular penicillin for her condition. The doctor returned from his business junket and discontinued the use of all antibiotics because he believed that the infection had run its course. Shortly thereafter, it became necessary to amputate his patient's leg below the knee. The patient obtained a medical malpractice judgment in state court against the doctor. The doctor subsequently sought refuge in bankruptcy. The record established that the debtor-doctor knew that the proper treatment for his patient's infection was intravenous, rather than oral, penicillin. The debtor admitted that he nevertheless administered oral penicillin partly because his patient had frequently complained about medical expenses on previous occasions. The district court affirmed the judgment of the bankruptcy court which found the debt to be nondischargeable under § 523(a)(6). The district court, relying on the substantial certainty test articulated in In re Long, 774 F.2d 875 (8th Cir. 1985), concluded that the debtor's belief that he was providing his patient with substandard care when he prescribed oral penicillin was a willful and malicious injury within the meaning of the statute. The Court of Appeals for the Eighth Circuit, sitting en banc, reversed and found the debt dischargeable in the debtor's bankruptcy. Geiger, 113 F.3d at 850-51. The appellate court framed the issue by asking whether the statute requires "'an intentional act that results in injury'" or "'an act with an intent to cause injury?'" Id. at 852 (quoting Perkins v. Scharffe, 817 F.2d 392, 393 (6th Cir. 1987), cert. denied, 484 U.S. 853 (1987)). The court adopted the latter construction. Id. The majority found determinative the fact that there was no suggestion that the debtor desired to cause the resulting consequences or believed that harm which resulted would follow from his actions. Id. at 852-53. At most, the court posited, the debtor's deviation from standard treatment was negligent or reckless. Id. at 853. In rejecting approaches taken by courts in other jurisdictions, the majority opined that those decisions failed to pay sufficient attention to the legislative history of the statute and did not give maximum effect the bankruptcy policy of a strict construction of the statute. Id. The dissent believed that the majority unnecessarily restricted the reach of the statute and sharply departed from the interpretation accorded the provision by other circuit courts. Id. at 854. Furthermore, the minority noted that "[a]lthough the court cites In re Long in support of its conclusion granting discharge, it actually enunciates a significantly more restrictive standard." Id. at 859. The dissent believed that debtor's knowing administration of substandard care transcended merely recklessness. Id. at 860.
303. See supra notes 29-32 and accompanying text (indicating that exceptions to discharge are to be narrowly construed in favor of the debtor).
304. 11 U.S.C. § 523(a)(6) (1994). See Geiger, 113 F.3d at 852 (noting that the term "willful" modifies the word "injury" and that what is therefore required is a deliberate or intentional injury, rather than a deliberate or intentional act).
305. See, e.g., Printy v. Dean Witter Reynolds, Inc., 110 F.3d 853, 859 (1st Cir. 1997); Navistar Fin. Corp. v. Stelluti (In re Stelluti), 94 F.3d 84, 87 (2d Cir. 1996); Papadakis v. Zelis (In re Zelis), 66 F.3d 205, 208 (9th Cir. 1995); Vulcan Coals v. Howard, 946 F.2d 1226, 1228-29 (6th Cir. 1991); C.I.T. Fin. Servs. v. Posta (In re Posta), 866 F.2d 364, 367 (10th Cir. 1989) (indicating that the focus of the malice inquiry is on the debtor's actual knowledge or the reasonable foreseeability that the conduct will result in injury); Chrysler Credit Corp. v. Rebhan, 842 F.2d 1257, 1263 (11th Cir. 1988); Chrysler Credit Corp. v. Perry Chrysler Plymouth, Inc., 783 F.2d 480,486 (5th Cir. 1986); Impulsora Del Territorio Sur, SA. v. Cecchini (In re Cecchini), 780 F.2d 1440, 1443 (9th Cir. 1986); St. Paul Fire & Marine Ins. Co. v. Vaughn, 779 F.2d 1003, 1008-09 (4th Cir. 1985). The courts embracing the constructive or implied malice standard articulated in Tinker have either disregarded the legislative commentary overruling the decision, see, e.g., CreditThrift of Am. v. Auvenshine (In re Auvenshine), 9 B.R. 772, 775 (Bankr. W.D. Mich. 1981), or reason that Congress intended to overrule Tinker only insofar as a reckless disregard standard applied to the "willful" requirement. See, e.g., United Bank v. Nelson, 35 B.R. 766 (N.D. Ill. 1983). Under the latter approach, the courts reason that Congress did not intend to disturb the application of the implied malice standard with respect to satisfying the "malicious" requirement under § 523(a)(6). See id. at 774.
306. See, e.g., Rebhan, 842 F.2d at 1262-63; Perkins v. Scharffe, 817 F.2d 392 (6th Cir. 1987). See also United Bank v. Nelson, 35 B.R. 766, 776-77 (N.D. Ill. 1983) ("'[W]illful and malicious' injury means a deliberate or intentional act in which the debtor knows his act would harm the creditors [sic] interest and proceeds in the [face] of the knowledge. The debtor's knowledge may be inferred . . . ."). In the context of torts, "[t]he usual meaning assigned to 'willful' . . . is that the actor has intentionally done an act of an unreasonable character in disregard of a known or obvious risk that was so great as to make it highly probable that harm would follow." KEETON ET AL., supra note 53, § 34, at 213.
307. A "knowing" disregard requires an examination of the debtor's subjective state of mind: "it does not matter that a 'reasonable debtor' should have known that his act would adversely affect another's rights." First Nat'l Bank v. Stanley (In re Stanley), 66 F.3d 664, 668 (4th Cir. 1995). As for logical consequences, see Posta, 866 F.2d at 367- But see Barclays Am./Bus. Credit, Inc. v. Long (In re Long), 774 F.2d 875, 881 (8th Cir. 1985) (indicating that the debtor's "knowledge that legal rights are being violated is insufficient to establish malice").
308. Vaughn, 779 F.2d at 1008-09. "The search for malice is always a perplexing exercise, dealing as it does with a brooding malevolence, a private design for harm, from which society seeks protection in the law. Easy to deny and hard to prove, the secret state of mind may be laid bare, if at all, by reference to the acts of its creator." Production Credit Ass'n v. Clark (In re Clark), 50 B.R. 122, 124 (Bankr. D.N.D. 1985) (quoting In re Cooney, 18 B.R. 1011 (Bankr. W.D. Ky. 1982)).
309. A standard which is predicated on an act that necessarily produces harm comes close to approximating the standard of recklessness. It is therefore arguable that some courts under the expansive approach are applying a standard that Congress specifically intended to abrogate.
310. See Conte v. Gautam (In re Conte), 33 F.3d 303, 308 (3d Cir. 1994) (indicating that a narrow interpretation of § 523(a)(6) restricts its application to the unusual circumstance where a debtor is "fool- hardy enough to make some plainly malevolent utterance expressing his intent to injure his creditor" or to express a belief that an injury was substantially certain to follow).
311. See Kawaauhau v. Geiger, 66 U.S.L.W. 3201, 3203 (U.S. Sept. 29, 1997).
312. The full text of § 523(a)(7) provides: (a) A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt - . . . (7) to the extent that such debt is for a fine, penalty, or forfeiture payable to and for the benefit of a governmental unit, and is not compensation for actual pecuniary loss, other than a tax penalty - (A) relating to a tax of a kind not specified in paragraph (1) of this subsection; or (B) imposed with respect to a transaction or event that occurred before three years before the date of the filing of the petition; . . . . 11 U.S.C. § 523(a)(7) (1994). See id. § 101(27) (broadly defining the term "governmental unit" to include any "department, agency or instrumentality" of a governmental body).
313. United States Dep't of Housing & Urban Dev. v. Cost Control Mktg. & Sales Management of Va., Inc., 64 F.3d 920, 927 (4th Cir. 1995), cert. denied, 116 S. Ct. 1673 (1996).
314. See, e.g., In re Thomashefsky, 51 F.2d 1040 (2d Cir. 1931); In re Abramson, 210 F. 878 (2d Cir. 1914).
315. Criminal Victims Protection Act of 1990, Pub. L. No. 101-581, § 3, 104 Stat. 2865 (codified at 11 U.S.C. § 1328(a)(3)) (enacted in response to Pennsylvania Department of Public Welfare v. Davenport, 495 U.S. 552 (1990), which held that state criminal restitution orders were dischargeable in Chapter 13). See S. REP. NO. 101-434, at 8 (1990), reprinted in 1990 U.S.C.C.A.N. 4065, 4071.
316. 479 U.S. 36 (1986).
317. Id. at 50 (holding that § 523(a)(7) preserves from the bankruptcy discharge "any condition a state criminal court imposes as part of a criminal sentence"). The restitutional obligation in Kelly was imposed in connection with a criminal conviction pursuant to a guilty plea, the payment thereof made an express condition of the defendant's probation. See id. at 36. See also Neff v. Knodle (In re Knodle), 187 B.R. 660 (Bankr. D.N.D. 1995); O'Malley v. Raer (In re O'Malley), 90 B.R. 417 (Bankr. D. Minn. 1988).
318. Kelly, 479 U.S. at 44.
319. Id. at 52-53.
320. Id. at 51-53; U.S. Dep't of Housing & Urban Dev. v. Cost Control Mktg. & Sales Management of Va., Inc., 64 F.3d 920, 927-28 (4th Cir. 1995). The Supreme Court has since reaffirmed the efficacy of the principles articulated and the conclusions reached in Kelly. See Pennsylvania Dep't of Pub. Welfare v. Davenport, 495 U.S. 552, 562 (1990); United States v. Ron Pair Enters., Inc., 489 U.S. 235, 244-45 (1989). Although Kelly involved a state court criminal restitution order, every court that has since considered the scope § 523(a)(7) has concluded that the rationale of Kelly applies equally to criminal restitution orders imposed by the federal courts. FDIC v. Soderling (In re Soderling), 998 F.2d 730, 732 (9th Cir. 1993). See United States v. Vetter, 895 F.2d 456, 459 (8th Cir.1990); United States v. Caddell, 830 F.2d 36, 39 (5th Cir.), reh'g denied, 833 F.2d 1010 (5th Cir. 1987); Fernandez v. IRS (In re Fernandez), 112 B.R. 888, 892 (Bankr. N.D. Ohio 1990); FDIC v. Wright (In re Wright), 87 B.R. 1011, 1015 n.3 (Bankr. S.D. 1988).
321. See State v. Kovacs (In re Kovacs), 29 B.R. 816, 818 (Bankr. S.D. Ohio 1982), aff'd, 681 F.2d 454 (6th Cir. 1983), aff'd, 469 U.S. 274 (1985) (finding a state court judgment requiring the debtor to clean up industrial waste was dischargeable since it compensated the state for pecuniary loss).
322. See Thompson v. Commonwealth (In re Thompson), 16 F.3d 576, 581 (4th Cir.) (finding unpaid court costs assessed in connection with the Chapter 7 debtor's criminal conviction to be nondischargeable), cert. denied, 512 U.S. 1221 (1994); United States v. WRW Corp., 986 F.2d 138, 145 (6th Cir. 1993) (opining that civil penalties imposed for the willful violation of safety standards under a federal statute are nondischargeable even though the penalties were "rationally related to the goal of making the Government whole by roughly compensating it for prosecutorial and investigative expenses"); State v. Hollis (In re Hollis), 810 F.2d 106, 109 (6th Cir. 1987); In re Zarzynski, 771 F.2d 304, 306 (7th Cir. 1985) (concluding that the imposition of costs expended in connection with a criminal prosecution must be viewed as part of the penalty even though it is measured by the extent of what was expended by the government in the fulfillment of its police power); Board of Prof'l Responsibility v. Haberman (In re Haberman), 137 B.R. 292 (Bankr. E.D. Wis. 1992) (finding board of professional responsibility costs in attorney disciplinary procedure to be nondischargeable). Accord In re Betts, 1995 WL 108940 (7th Cir. March 14, 1995) (unpublished opinion).
323. See State v. Hughes (In re Hughes), 87 B.R. 49 (Bankr. S.D. Ohio 1988).
324. 11 U.S.C. § 523(a)(7)(A) (1994). For the text of this provision, see supra note 313.
325. See 11 U.S.C. §§ 507(a), 523(a)(1).
326. See McKay v. United States, 957 F.2d 689 (9th Cir. 1992); Burns v. United States (In re Burns), 887 F.2d 1541 (11th Cir. 1989); Hanna v. United States (In re Hanna), 872 F.2d 829, 831-32 (8th Cir. 1989); Erickson v. Commissioner, 172 B.R. 900, 914 (Bankr. D. Minn. 1994); Olson v. United States (In re Olson), 154 B.R. 276, 283-84 (Bankr. D.N.D. 1993). See also 124 CONG. REC. 17,406 (1978) (statement of Sen. DeConcini), reprinted in 1978 U.S.C.C.A.N. 6505, 6569.
327. A "punitive" tax penalty is one which does not represent "compensation for actual pecuniary loss." See, e.g., Matlock v. United States (In re Matlock), 104 B.R. 389, 393 (Bankr. N.D. Okla. 1989) (finding a "100% penalty" imposed against responsible officers for failing to remit withholding taxes to the government to be a pecuniary loss penalty). Such penalties are "penalties other than those which represent collection of a principal amount of tax liability through the form of a 'penalty.'" 124 CONG. REC. 34,106 (1978) (statement of Sen. DeConcini), reprinted in 1978 U.S.C.C.A.N. 6505, 6569. See S. REP. NO. 95-989, at 79 (1978), reprinted in 1978 U.S.C.C.A.N. 5787, 5865.
328. 11 U.S.C. § 523(a)(7)(B).
329. The legislative history to a proposed section which had an apparent relationship to § 523(a)(7) provides: The House amendment also adopts the substance of the definition . . . of when taxes are to be considered "incurred" except that the House amendment applies these definitions solely for purposes of determining which category of section 507 tests the priority of a particular tax liability. . . . Under the House amendment, for purposes of the priority rules, a tax on income for a particular period is to be considered "incurred" on the last day of the period. A tax on or measured by some event, such as the payment of wages or a transfer by reason of death or gift, or an excise tax on a sale or other transaction is to be considered "incurred" on the date of the transaction or event. 124 CONG. REC. 34,016 (statement of Sen. DeConcini) (emphasis added); id. at 32,416 (statement of Rep. Edwards) (emphasis added). See Burns, 887 F.2d at 1551 n.10.
330. See, e.g., In re Eysenbach, 183 B.R. 365, 368 (W.D.N.Y. 1995); Linder v. United States (In re Linder), 139 B.R. 950, 953-54 (D. Colo. 1992). But see Gore v. United States (In re Gore), 182 B.R. 293, 298-305 (Bankr. N.D. Ala. 1995); Turner v. United States (In re Turner), 182 B.R. 317, 323-29 (Bankr. N.D. Ala. 1995).
331. See Cassidy v. Commissioner, 814 F.2d 477, 480 (7th Cir. 1987); Hartman v. United States (In re Hartman), 110 B.R. 951, 956 (D. Kan. 1990); Carlton v. I.R.S. (In re Carlton), 19 B.R. 73, 74-75 (D.N.M. 1982); Ferrara v. I.R.S. (In re Ferrara), 103 B.R. 870, 873 (Bankr. N.D. Ohio 1989); In re Harris, 59 B.R. 545, 549 (Bankr. W.D. Va. 1986); Gerulis v. United States (In re Gerulis), 56 B.R. 283, 286 (Bankr. D. Minn. 1985). See also 11 U.S.C. § 102(5) (indicating that "'or' is not exclusive").
332. See, e.g, McKay v. United States, 957 F.2d 689, 693 (9th Cir. 1992); Roberts v. United States (In re Roberts), 906 F.2d 1440, 1441 (10th Cir. 1990); Burns, 887 F.2d at 1543-52; Byrum v. I.R.S. (In re Byrum), 139 B.R. 498, 550 (C.D. Cal. 1992); Pierce v. United States (In re Pierce), 184 B.R. 338, 344 (Bankr. N.D. Iowa 1995); Olson v. United States (In re Olson), 154 B.R. 276, 284 (Bankr. D.N.D. 1993); Henderson v. United States (In re Henderson), 137 B.R. 239, 242 (Bankr. E.D. Ky. 1991); Hopkins v. United States (In re Hopkins), 131 B.R. 308, 314 (Bankr. N.D. Tax. 1991); Frary v. United States (In re Frary), 117 B.R. 541, 548-49 (Bankr. D. Alaska 1990).
333. See supra note 333 (citing authority).
334. See generally United States v. Ron Pair Enters., Inc., 489 U.S. 235, 241-43 (1989) (concluding that a court's inquiry is at an end when the language of the statute is plain, unless the literal application of the statute would produce a result that is demonstrably at odds with the intention of the drafters).
335. Roberts, 906 F.2d at 1443-44.
336. There was no direct reference to educational loans in the Bankruptcy Act. Section 439A of Part B of Title VI of the Higher Education Act of 1965, Pub. L. No. 89-329, was amended by the Education Amendments of 1976, Pub. L. No. 94-482, § 127(a), 90 Stat. 2141, to make federally guaranteed or insured loans nondischargeable in bankruptcy. See 20 U.S.C. § 1087-3 (1976) (repealed by the Bankruptcy Reform Act of 1978, Pub. L. No. 95-598, § 317, 92 Stat. 2678).
337. H.R. REP. NO. 95-595, at 133 (1977), reprinted in 1978 U.S.C.C.A.N. 5963, 6094. It was reported that over eighty percent of bankruptcies brought by students seeking to discharge their educational indebtedness were filed within three years of graduation. Id. 339 See In re Pelkowski, 990 F.2d 737, 743 (3d Cir. 1993); Andres Univ. v. Merchant (In re Merchant), 958 F.2d 738, 742 (6th Cir. 1992); Law v. Educational Resources Inst., Inc. (In re Law), 159 B.R. 287, 291 (Bankr. D.S.D. 1993).
338. See H.R. REP. NO. 95-595, at 150, 152, reprinted in 1978 U.S.C.C.A.N. 5963, 6111, 6113. A representative of the American Bankers Association and Consumer Bankers Association Task Forces on Bankruptcy testified before the Judiciary Committee which was considering the legislation: [T]his exception, in effect, gives the government agencies (which are the guarantors of many student loans) and educational institutions privileged treatment that is not warranted. If the social utility of what is exchanged for the debt is to be determinative of dischargeability then the question can be raised of whether it is proper to discharge medical bills, food bills, etc. This proposed [legislation] simply suggests that if sufficient political pressure can be generated, a special interest group can obtain special treatment under the bankruptcy law. We believe that this section runs counter to the general policy of limiting exceptions to discharge and grounds for objecting to discharge and should be eliminated. Id. at 150, reprinted in 1978 U.S.C.C.A.N. 5963, 6111 (statements of Walter W. Vaughan). The Honorable Clive W. Bare, Bankruptcy Judge for the Eastern District of Tennessee, testified on behalf of the National Bankruptcy Conference and indicated that if the problem with the student loan program was attributable to abuses in the program itself, "there seems no valid reason to single out student borrowers for discriminatory discharge treatment . . . ." Id. at 151, reprinted in 1978 U.S.C.C.A.N. 5963, 6112. Rather, he indicated, student loan losses can and should be minimized by "adequate management." Id. 341 Id. at 133, reprinted in 1978 U.S.C.C.A.N. 5963, 6094. See generally United States Dep't of Health & Human Servs. v. Smith, 807 F.2d 122 (8th Cir. 1986) (setting forth the historical development of § 523(a)(8) and discussing the legislative history surrounding its promulgation).
339. See, e.g., Phoenix Inst. of Tech. v. Klein (In re Klein), 57 B.R. 818 (Bankr. 9th Cir. 1985) (upholding confirmation of a Chapter 13 plan which proposed a repayment of twenty-two percent to the National Direct Student Loan lender); In re Winthurst, 97 B.R. 457 (Bankr. C.D. Ill. 1989) (confirming a Chapter 13 plan that proposed the nominal repayment of one percent to State Scholarship Commission); In re Owens, 82 B.R. 960 (Bankr. N.D. Ill. 1988) (confirming a Chapter 13 plan that proposed the repayment of fifteen percent of educational indebtedness to the Department of Health and Human Services).
340. See Student Loan Default Prevention Initiative Act of 1990, Pub. L. No. 101-508, 104 Stat. 1388, 1388-28 to 29. See also 11 U.S.C. §§ 1228(a)(2), 1328(a)(2) (1994) (excepting from the purview of the Chapter 12 and Chapter 13 discharge obligations which fall within § 523(a)(8)). Cf. id. § 1141(d)(2) ("The confirmation of a [Chapter 11] plan does not discharge an individual debtor from any debt excepted from discharge under section 523 of this title.").
341. It is significant to note that special and heightened rules for dischargeability are applicable to educational loans granted pursuant to the Health Education Assistance Loan Act (HEAL). See generally Rice v. United States, 1996 WL 128066 (6th Cir. 1996); In re Malloy, 155 B.R. 940 (E.D. Va. 1993), aff'd, 23 F.3d 402 (4th Cir. 1994) (Table); Kline v. United States (In re Kline), 155 B.R. 762 (Bankr. W.D. Mo. 1993); Hines v. United States (In re Hines), 63 B.R. 731 (Bankr. D.S.D. 1986). The dischargeability of a HEAL loan is governed by 42 U.S.C. § 294f(g) (1994) and 42 C.F.R. § 60.-8(b)(5), not 11 U.S.C. § 523(a)(8).
342. S. REP. NO. 95-989, at 79 (1978), reprinted in 1978 U.S.C.C.A.N. 5787, 5865 (indicating that § 523(a)(8) "is intended to be self-executing and the lender is not required to file a complaint to determine the nondischargeability of any student loan").
343. The funds advanced must be given for educational purposes in order to qualify. See, e.g., Santa Fe Medical Servs., Inc. v. Segal (In re Segal), 57 F.3d 342, 347 (3d Cir. 1995); Stevens Inst. of Tech. v. Joyner (In re Joyner), 171 B.F. 762, 764-65 (Bankr. E.D. Pa. 1994); United States Dep't of Health & Human Servs. v. Vretis (In re Vretis), 56 B.R. 156, 157 (Bankr. MD. Fla. 1985); Department of Mental Health v. Shipman (In re Shipman), 33 B.R. 80, 82 (Bankr. W.D. Mo. 1983). Since the focus of § 523(a)(8) is on the nature and character of the loan, the fact that the debtor may have elected to apply the loan proceeds for other purposes should be largely irrelevant. See Barth v. Wis. Higher Ed. Corp. (In re Barth), 86 B.R. 146, 148 (Bankr. W.D. Wis. 1988) (reasoning that the provisions of § 523(a)(8) could not be defeated simply because the loan proceeds were applied to "something other than the debtor's education;" therefore, an obligation remains nondischargeable despite the fact that the student may spend the loan proceeds "on a car or a vacation"). But see Ealy v. First Nat'l Bank (In re Ealy), 78 B.R. 807, 898 (Bankr. C.D. Ill. 1987).
344. See United States Dep't of Health & Human Servs. v. Smith, 807 F.2d 122 (8th Cir. 1986) (rejecting the debtor's contention that the scholarship he received, which obligated him either to serve in a one-year position or repay the funds advanced was a "contingent scholarship," and not a "loan"); Alibatya v. New York Univ. (In re Alibatya), 178 B.R. 335 (Bankr. E.D.N.Y. 1995) (finding debtor's unpaid student housing charges was not an "educational loan"); In re Ellenburg, 89 B.R. 258, 262 (Bankr. N.D. Ga. 1998) (finding that claims against debtor for unpaid tuition were not "educational loans" where there was no evidence of an agreement under which the creditors advanced funds or the debtor agreed to pay back the debt under any terms).
345. 11 U.S.C. § 101(27) (defining "governmental unit" as the "United States; State; Commonwealth; District; Territory; municipality; foreign state; department; agency, or instrumentality of the United States, . . . a State, a Commonwealth, a District, a Territory, a municipality, or a foreign state; or other foreign or domestic government").
346. The scope of the statute was expanded by amendment in 1990 in order to bring within its purview more sources of educational debt, such as funds received as an educational benefit, scholarship, or stipend.
347. 11 U.S.C. § 523(a)(8). See T I Federal Credit Union v. Delbonis, 72 F.3d 921, 927, 930-35 (1st Cir. 1995) (finding a federal credit union to be a "government unit"); Columbus College v. Shore (In re Shore), 707 F.2d 1337, 1339 (11th Cir. 1983) (concluding that the student loan had been made by a governmental unit for purposes of § 523(a)(8) where the regents of a state university system served as trustee to a private trust which had been the source of the debtor's funds); Hemar Serv. Corp. of Am., Inc. v. Pilcher (In re Pilcher), 149 B.R. 595, 598 (B.A.P. 9th Cir. 1993); Educational Resources Inst. v. Hammarstrom (In re Hammarstrom) 95 B.R. 160, 165 (Bankr. N.D. Cal. 1989) (indicating that an educational debt should be nondischargeable where the government or a "nonprofit institution plays any meaningful part"). But see Navy Fed. Credit Union v. Simmons (In re Simmons), 175 B.R. 624, 625 (Bankr. E.D. Va. 1994); Lincoln Park Community Credit Union v. Sinclair-Ganos (In re Sinclair-Ganos), 133 B.R. 382, 384 (Bankr. W.D. Mich. 1991) (finding a credit union not be a "nonprofit institution" within the scope of § 523(a)(8)).
348. 11 U.S.C. § 523(a)(8)(A).
349. Id. § 523(a)(8)(B).
350. Manriquez v. Massachusetts Higher Ed. Assistance Group (In re Manriquez), 207 B.R. 890, 893 (Bankr. 9th Cir. 1996).
351. One of the purposes of the seven-year moratorium is to discourage borrowers of educational loans, who do not make a meaningful effort to repay their loans, from filing for bankruptcy relief shortly after the beginning of a career whose start was financed by those loans: The statute was designed to ensure that graduates would seek bankruptcy for legitimate reasons only, and not merely to avoid the obligation to repay student loans. The key to accomplishing the congressional objective was the adoption of a bar to discharge in bankruptcy for a fixed period of time that would end sufficiently long after the student's studies had terminated. Schirmer v. Minnesota Higher Ed. Coord. Bd. (In re Schirmer), 191 B.R. 155, 159 (Bankr. D. Minn. 1996). The statute was amended in 1990 in order to make it more difficult to discharge educational indebtedness by lengthening the moratorium from five years to seven. See Student Loan Default Prevention Initiative Act of 1990, Pub. L. No. 101-647, § 3621, 104 Stat. 4789, 4964-65.
352. See Schirmer, 191 B.R. at 159. In Schirmer, the debtor was contractually obligated to make quarterly interest payments while in school, but was not required to make any payments on the principal obligation until thirteen months after being an eligible student. After filing for bankruptcy protection and seeking to discharge the educational indebtedness, the debtor argued that the loan "first became due" within the meaning of § 523(a)(8)(A) on the date he was required to make an interest payment. The United States Bankruptcy Court for the District of Minnesota disagreed. The court, noting that the statute draws a distinction for purposes of dischargeability between the "debt" and the "loan," concluded that the only principled way to give meaning to the terminology Congress employed was to equate the term "loan" to the principal amount of credit extended. Id. at 158-59. The court buttressed its analysis by indicating: "If an educational loan were considered to 'first become due' upon the commencement of a contractual duty to pay accruing interest, a student borrower could conceivably exhaust the majority of the statutory moratorium on dischargeability while still a student. This result clearly would be contrary to Congress's intent." Id. at 159.
353. Woodcock v. Chemical Bank, 45 F.3d 363, 365 (10th Cir. 1995); Nunn v. State (In re Nunn), 788 F.2d 617 (9th Cir. 1986). The burden of proof is on the creditor to establish when the debt became due or if there was any suspension or deferment of the repayment period. Wardlow v. Great Lakes Higher Ed. Corp. (In re Wardlow), 167 B.R. 158, 150 (Bankr. W.D. Mo. 1993).
354. Thorson v. California Student Aid Comm'n (In re Thorson), 195 B.R. 101 (B.A.P. 9th Cir. 1996) (holding that any valid, post-due date period of deferment or suspension in the repayment period should be deducted and therefore extends the nondischargeability period); United States v. McGrath, 143 B.R. 820, 824 (D. Md. 1992), aff'd, 8 F.3d 821 (4th Cir. 1993) (Table); Wardlow, 167 B.R. at 150. Cf. Commonwealth v. Gibson (In re Gibson), 184 B.R. 716, 717 (E.D. Va. 1994) (indicating that "the seven-year nondischargeability period is calculated by determining the amount of time between the date the loan became due and the date the borrower filed bankruptcy, then subtracting the amount of time during which any "applicable suspension" periods were in effect").
355. See, e.g., Brinzer v. Pennsylvania State Univ. (In re Brinzer), 45 B.R. 831 (S.D. W. Va. 1984); Whitehead v. State (In re Whitehead), 31 B.R. 381 (Bankr. S.D. Ohio 1983); Crumley v. Hope College, 21 B.R. 170 (Bankr. E.D. Tenn. 1982).
356. Gibson, 184 B.R. at 719. The district court in Gibson was required to address the issue of whether the automatic stay of § 362 tolls the period of nondischargeability for student loans. The court concluded that the "suspension of the repayment period" which is not to be counted in deciding whether a student loan obligation has been due and owing for the required seven years, must be broadly construed and is not limited only to forbearances or deferments under the original student loan agreement. Id. at 718-19. Rather, it may include a period during which the lender was barred from taking any action to collect the debt as a result of the debtor's prior bankruptcy filing. Id. Accord Saburah v. United States Dep't of Ed., 136 B.R. 246, 254 (Bankr. C.D. Cal. 1992).
357. See, e.g., Hiatt v. Indiana State Student Assistance Comm'n, 36 F.3d 21, 25 (7th Cir. 1994), cert. denied, 115 S. Ct. 1109 (1995); McGrath, 143 B.R. at 824; Hesselgrave v. Pennsylvania Higher Ed. Assistance Agency (In re Hesselgrave), 177 B.R. 681, 683-84 (Bankr. D. Or. 1995); Wardlow, 167 B.R. 148, 150 (Bankr. W.D. Mo. 1993); Martin v. Great Lakes Higher Educ. Corp., 137 B.R. 770, 772 (Bankr. W.D. Mo. 1992).
358. Law v. Educational Resources Inst., Inc. (In re Law), 159 B.R. 287, 291 (Bankr. D.S.D. 1993); Shoberg v. Minnesota Higher Ed. Coord. Council, 41 B.R. 684, 687 (Bankr. D. Minn. 1984). Accord Cuenca v. Department of Ed., 64 F.3d 669 (10th Cir. 1995) (Table). See generally In re Merchant, 958 F.2d 738, 740 (6th Cir. 1992) (indicating that the public policy of the continued availability funds and solvency of student loan programs outweighs the debtor's need for a fresh start).
359. North Dakota State Bd. of Higher Ed. v. Frech (In re Frech), 62 B.R. 235, 243 (Bankr. D. Minn. 1986) (quoting In re Briscoe, 16 B.R. 128, 131 (Bankr. S.D.N.Y. 1979)).
360. Id. at 241.
361. Id. Accord Gilchrist v. Department of Ed, 865 F.2d 1329 (D.C. Cir. 1988) (Table) (indicating that the hardship required under § 523(a)(8)(B) must be "significant").
362. Frech, 62 B.R. at 241. See Phelps v. Hemar Ins. Corp. (In re Phelps), 180 B.R. 27, 28 (Bankr. D.R.I. 1995) (requiring a permanent hardship). See also Mathews v. Higher Ed. Assistance Found. (In re Mathews), 166 B.R. 940, 945 (Bankr. D. Kan. 1994) (requiring a "certainty of hopelessness"); Childs v. Higher Ed. Assistance Found. (In re Childs), 89 B.R. 819, 820 (Bankr. D. Neb. 1988).
363. In re Roberson, 999 F.2d 1132, 1136 (7th Cir. 1993); Law, 159 B.R. at 287.
364. 5 B.C.D. 532 (Bankr. E.D. Pa. 1979).
365. Schoberg v. Minnesota Higher Ed. Coord. Council, 41 B.R. 684, 687 (Bankr. D. Minn. 1981). See Andrews v. South Dakota Student Loan Assistance Corp. (In re Andrews), 661 F.2d 702 (8th Cir. 1981); Robinson v. United States Dep't of Ed., 193 B.R. 967 (Bankr. N.D. Ala. 1996); Franklin v. National City Bank, Adv. No. 4-95-032, 1995 WL 539549, at *5 (Bankr. D. Minn. Sept. 8, 1995); Bethune v. Student Loan Guar. Found. (In re Bethune), 165 B.R. 258 (Bankr. E.D. Ark. 1994); Binder v. United States Dep't of Ed., 54 B.R. 736, 739 (Bankr. D.N.D. 1985); Albert v. Ohio Student Loan Comm'n (In re Albert), 25 B.R. 98, 100 (Bankr. N.D. Ohio 1982). The Commission on the Bankruptcy Laws of the United States prepared a report for congressional consideration: In order to determine whether nondischargeability of the debt will impose an "undue hardship" on the debtor, the rate and amount of his future resources should be estimated reasonably in terms of ability to obtain, retain, and continue employment and the rate of pay that can be expected. Any unearned income or other wealth which the debtor can be expected to receive should also be taken into account. The total amount of income, its reliability, and the periodicity of its receipt should be adequate to maintain the debtor and his dependents at a minimal standard of living within their management capability, as well as to pay the educational debt. COMM'N ON THE BANKR. LAWS OF THE U.S., REPORT OF THE COMMISSION ON THE BANKRUPTCY LAWS OF THE UNITED STATES, H.R. DOC. NO. 93-137, Part I (1973), reprinted in 2 LAWRENCE P. KING ET AL., COLLIER ON BANKRUPTCY, Appendix, at 140-41 (15th ed. 1995). By extrapolating the factors suggested in the Commission Report, some courts have formulated a separate test for "undue hardship." See Sands v. United Student Aid Funds, Inc., (In re Sands), 166 B.R. 299, 303 (Bankr. W.D. Mich. 1994).
366. Schoberg v. Minnesota Higher Ed. Coord. Council, 41 B.R. 684, 687 (Bankr. D. Minn. 1981). See Andrews v. South Dakota Student Loan Assistance Corp. (In re Andrews), 661 F.2d 702 (8th Cir. 1981); Robinson v. United States Dep't of Ed., 193 B.R. 967 (Bankr. N.D. Ala. 1996); Franklin v. National City Bank, Adv. No. 4-95-032, 1995 WL 539549, at *5 (Bankr. D. Minn. Sept. 8, 1995); Bethune v. Student Loan Guar. Found. (In re Bethune), 165 B.R. 258 (Bankr. E.D. Ark. 1994); Binder v. United States Dep't of Ed., 54 B.R. 736, 739 (Bankr. D.N.D. 1985); Albert v. Ohio Student Loan Comm'n (In re Albert), 25 B.R. 98, 100 (Bankr. N.D. Ohio 1982). The Commission on the Bankruptcy Laws of the United States prepared a report for congressional consideration: In order to determine whether nondischargeability of the debt will impose an "undue hardship" on the debtor, the rate and amount of his future resources should be estimated reasonably in terms of ability to obtain, retain, and continue employment and the rate of pay that can be expected. Any unearned income or other wealth which the debtor can be expected to receive should also be taken into account. The total amount of income, its reliability, and the periodicity of its receipt should be adequate to maintain the debtor and his dependents at a minimal standard of living within their management capability, as well as to pay the educational debt. COMM'N ON THE BANKR. LAWS OF THE U.S., REPORT OF THE COMMISSION ON THE BANKRUPTCY LAWS OF THE UNITED STATES, H.R. DOC. NO. 93-137, Part I (1973), reprinted in 2 LAWRENCE P. KING ET AL., COLLIER ON BANKRUPTCY, Appendix, at 140-41 (15th ed. 1995). By extrapolating the factors suggested in the Commission Report, some courts have formulated a separate test for "undue hardship." See Sands v. United Student Aid Funds, Inc., (In re Sands), 166 B.R. 299, 303 (Bankr. W.D. Mich. 1994).
367. Frech, 62 B.R. at 241; Johnson, 5 B.C.D. at 544. See Turner v. Detroit & N. Sav. (In re Turner), 69 B.R. 62, 64 (Bankr. D. Minn. 1986). It is significant to note that when considering the debtor's financial resources, the income of a nondebtor spouse should also be considered. Ipsen v. Higher Ed. Assistance Found. (In re Ipsen), 149 B.R. 583, 585 (Bankr. W.D. Mo. 1992); Hokenson v. Texas Guar. Student Loan Corp. (In re Hokenson), Adv. No. 4-95-193 (Bankr. D. Minn. Dec. 18, 1995) (unpublished opinion).
368. Erickson v. North Dakota State Univ. (In re Erickson), 52 B.R. 154, 157 (Bankr. D.N.D. 1985); Shoberg, 41 B.R. at 687; Cossette v. Higher Ed. Assistance Found., 41 B.R. 689, 691 (Bankr. D. Minn. 1984) (noting that at least one court has also required a showing that the debtor made some colorable effort to repay the obligation as a measure of good faith).
369. Johnson, 5 B.C.D. at 544.
370. Id. See Ericsson, 52 B.R. at 157-58.
371. See, e.g., Pennsylvania Higher Ed. Assistance Agency v. Faish (In re Faish), 72 F.3d 298, 303 (3d Cir. 1995).
372. See, e.g., id. at 303-04.
373. It has been noted that an inquiry which incorporates considerations of the "value" or "benefit" of an education improperly turns the government into an insurer of the student-turned-debtor's success: Congress' decision to increase the availability of higher education through student loans does not necessarily equate to a decision to insure the future success of each student taking advantage of that opportunity. The government guarantees repayment of the loan to the private lender so that those who, because of their current wealth and future earning potential would not be eligible to receive any financing or only financing at a higher rate of interest, may nonetheless receive an education. The government is not twisting the arms of potential students. The decision of whether or not to borrow for college education lies with the individual; absent an expression to the contrary, the government does not guarantee the student's financial success. If the leveraged investment of an education does not generate the return the borrower anticipated, the student, not the taxpayers, must accept the consequences of the decision to borrow. In re Roberson, 999 F.2d 1132, 1136-37 (7th Cir. 1993).
374. 72 B.R. 913 (Bankr. E.D. Pa. 1987).
375. Id. at 915 & n.2.
376. Id. at 915.
377. Id.
378. Id.
379. Id. at 916. See Reyes v. Oklahoma State Regents for Higher Ed. (In re Reyes), 154 B.R. 320 (Bankr. E.D. Okla. 1993); Reilly v. United Student Aid Funds, Inc., 118 B.R. 38 (Bankr. D. Md. 1990) (applying the Bryant test).
380. Bryant, 72 B.R. at 918.
381. 831 F.2d 395 (2d Cir. 1987).
382. Id. at 396.
383. Id. See In re Roberson, 999 F.2d 1132, 1135 (7th Cir. 1993).
384. Brunner, 831 F.2d at 396.
385. Pennsylvania Higher Ed. Assistance Agency v. Faish (In re Faish), 72 F.3d 298, 306 (3d Cir. 1996). See Halvorson v. Pennsylvania Higher Ed. Assistance Agency (In re Halvorson), 189 B.R. 840, 844 (Bankr. N.D. Ala. 1995) (finding that an inability to live on a budget in which expenses exceeded income is not the same thing as proving an inability to maintain a minimal standard of living). See also Melton v. New York State Higher Ed. Servs. Corp. (In re Melton), 187 B.R. 98 (Bankr. W.D.N.Y. 1995) (noting that debtors who have a minimal standard of living as a matter of choice do not satisfy the first prong of the Brunner test).
386. Brunner, 831 F.2d at 396. See, e.g., Windland v. United States Dept. of Ed. (In re Windland), 201 B.R. 178, 183 (Bankr. N.D. Ohio 1996) (finding student loan debt to be dischargeable because the debtor's financial circumstances were likely to persist well into the foreseeable future). See also supra notes 361-366 and accompanying text.
387. Faish, 72 F.3d at 305 (quoting Roberson, 999 F.2d at 1135).
388. See Brunner, 831 F.2d at 397; Maulin v. Sallimae (In re Maulin), 190 B.R. 153, 156 (Bankr. W.D.N.Y. 1995).
389. See Brunner, 831 F.2d at 397. See also Cheesman v. Tennessee Student Assistance Corp. (In re Cheesman), 25 F.3d 356, 360 (6th Cir. 1994), cert. denied, 115 S. Ct. 731 (1995).
390. Faish, 72 F.3d at 306.
391. See id. (finding the Brunner test to be "the most consistent with the scheme Congress established in 1978"); Cheesman, 25 F.3d at 360; Roberson, 999 F.2d at 1137; Brunner, 831 F.2d at 395 (authority adopting the Brunner test). See also Coveney v. Costep Servicing Agent, 192 B.R. 140 (Bankr. W.D. Tex. 1996); Hawkins v. Buena Vista College (In re Hawkins), 187 B.R. 294 (Bankr. N.D. Iowa 1995); O'Brien v. Household Bank (In re O'Brien), 165 B.R. 456 (Bankr. W.D. Mo. 1994).
392. In order to ameliorate the stringent "undue hardship" standard, a number of courts have retreated from an "all-or-nothing" stance and, in certain circumstances, permitted the partial discharge of student loan obligations. See, e.g., Raimondo v. New York State Higher Ed. Servs. Corp. (In re Raimondo) 183 B.R. 677, 681 (Bankr. W.D.N.Y. 1995). See also Cheesman, 25 F.3d at 360 (affirming bankruptcy court's stay of entry of order of nondischargeability for eighteen months in order to later assess the debtor's financial condition); Roberson, 999 F. 2d at 1137 (indicating that if the debtor's financial condition does not improve as the bankruptcy court anticipated, the debtor may bring a motion to reopen the case for further consideration pursuant to Rules 4007(a) and (b) of the Federal Rules of Bankruptcy Procedure). But see, e.g., Hawkins, 187 B.R. at 300-01 (refusing to view § 523(a)(8)(B) with a sliding-scale which permits the bankruptcy court to fashion a more manageable repayment schedule); Barrows v. Illinois Student Assistance Comm'n (In re Barrows), 182 B.R. 640, 652-53 (Bankr. D.N.H. 1994).
393. DAVID G. EPSTEIN ET AL., BANKRUPTCY § 7-33, at 542 (West 1993).
394. See, e.g., Boylen v. First Nat'l Bank (In re Boylen), 29 B.R. 924, 926 (Bankr. N.D. Ohio 1983).
395. See, e.g., id.
396. See id. 399 Kirkish v. Meritor Sav. Bank (In re Kirkish), 144 B.R. 367, 369 (Bankr. W.D. Mich. 1992). See supra notes 29-32 and accompanying text.
397. See Northwestern Univ. Student Loan Office v. Behr (In re Behr), 80 B.R. 124, 126 (Bankr. N.D. Iowa 1987); In re Meier, 85 B.R. 805 (Bankr. W.D. Wis. 1986); In re Zobel, 80 B.R. 950 (Bankr. N.D. Iowa 1986); Bawden v. First S. Fed. Sav. & Loan Ass'n (In re Bawden), 55 B.R. 459, 461 (Bankr. M.D. Ala. 1985); Washington v. Virginia State Educ. Assistance Auth. (In re Washington), 41 B.R. 211, 214 (Bankr. E.D. Va. 1984). See generally Peter B. Barlow, Note, Nondischargeability of Educational Debts Under Section 523(a)(8) of the Bankruptcy Code: Equitable Treatment of Cosigners and Guarantors?, 11 BANKR. DEV. J. 481 (1994-95); Melissa A. Hall, Comment, Non-Student Co-Signers and Section 523(a)(8) of the Bankruptcy Code, 1991 U. CHI. LEGAL F. 357 (arguing that the application of § 523(a)(8) to co- obligors of educational loans is unjustifiable in light of the statute's purpose and the inequities attendant upon co-obligors who are not the direct beneficiaries of the loans).
398. See Northwestern Univ. Student Loan Office v. Behr (In re Behr), 80 B.R. 124, 126 (Bankr. N.D. Iowa 1987); In re Meier, 85 B.R. 805 (Bankr. W.D. Wis. 1986); In re Zobel, 80 B.R. 950 (Bankr. N.D. Iowa 1986); Bawden v. First S. Fed. Sav. & Loan Ass'n (In re Bawden), 55 B.R. 459, 461 (Bankr. M.D. Ala. 1985); Washington v. Virginia State Educ. Assistance Auth. (In re Washington), 41 B.R. 211, 214 (Bankr. E.D. Va. 1984). See generally Peter B. Barlow, Note, Nondischargeability of Educational Debts Under Section 523(a)(8) of the Bankruptcy Code: Equitable Treatment of Cosigners and Guarantors?, 11 BANKR. DEV. J. 481 (1994-95); Melissa A. Hall, Comment, Non-Student Co-Signers and Section 523(a)(8) of the Bankruptcy Code, 1991 U. CHI. LEGAL F. 357 (arguing that the application of § 523(a)(8) to co- obligors of educational loans is unjustifiable in light of the statute's purpose and the inequities attendant upon co-obligors who are not the direct beneficiaries of the loans).
399. In re Pelkowski, 990 F.2d 737, 741 (3d Cir. 1993).
400. See id. at 741-42. Prior to the pronouncement of the Court of Appeals, only a small handful of district courts had occasion to consider the issue. See id at 738 n.2. These courts had unanimously ruled in favor of nondischargeability. See Educational Resources Inst., Inc. v. Varma (In re Varma), 149 B.R. 817 (N.D. Tex. 1992); Education Resources Inst., Inc. v. Wilcon (In re Wilcon), 143 B.R. 4 (D. Mass. 1992). See also Keilig v. Massachusetts Higher Ed. Assistance Corp. (In re LaFlamme), 188 B.R. 867 (Bankr. D.N.H. 1995); Uterhark v. Great Lakes Higher Ed. Corp., 185 B.R. 39 (Bankr. N.D. Ohio 1995); Education Resources Inst., Inc. v. Garelli (In re Garelli), 162 B.R. 552 (Bankr. D. Or. 1994); Owens v. Nebraska Higher Ed. Loan Program, Inc. (In re Owens), 161 B.R. 829 (Bankr. D. Neb. 1993); Law v. Educational Resources Int'l, Inc. (In re Law), 159 B.R. 287 (Bankr. D.S.D. 1993); Palmer v. Student Loan Fin. Corp. (In re Palmer), 153 B.R. 888 (Bankr. D.S.D. 1993); Barth v. Wisconsin Higher Ed. Corp. (In re Barth), 86 B.R. 146 (Bankr. W.D. Wis. 1988).
401. 11 U.S.C. § 523(a)(8) (1994) (emphasis added). The position of the United States Supreme Court in recent years has been to adhere to the principles of textualism and thereby restrict the interpretation of the Bankruptcy Code to the literal language of the statute, unless such an interpretation would produce a result that is demonstrably at odds with the intention of the drafters. See United States v. Ron Pair Enters., Inc. 498 U.S. 235, 241-42 (1989) (opining that where the language of the statute is plain, the court's sole function is to enforce it according to its terms); United States v. Rutherford, 442 U.S. 544, 552 (1979) ("Exceptions to clearly delineated statutes will be implied only where essential to prevent 'absurd results' or consequences obviously at variance with the policy of the enactment as a whole.").
402. See supra note 339 and accompanying text.
403. See supra notes 342-343 and accompanying text.
404. When Congress adopted § 523(a)(9), it had three principal objectives: (1) to deter drunk driving; (2) to ensure that those who caused injury by driving drunk did not escape civil liability through the bankruptcy laws; and (3) to protect the victims of drunk driving. Stackhouse v. Hudson (In re Hudson), 859 F.2d 1418, 1423 (9th Cir. 1988). Accord S. REP. NO. 101-434, at 6, reprinted in 1990 U.S.C.C.A.N. 4065, 4069 (quoting Hudson with approval).
405. Pub. L. No. 98-353, 98 Stat. 353 (1984). Senator John Danforth, in introducing legislation which would have added a new subsection to the Code declaring that "any" drunk driving debts would be deemed "willful" and "malicious" for purposes of § 523(a)(6), indicated: Today there exists an unconscionable loophole in the bankruptcy statute which makes it possible for drunk drivers who have injured, killed, or caused property damage to others to escape civil liability for their actions by having their judgment debt discharged in Federal bankruptcy court. This loophole affords opportunities for scandalous abuse of judicial process.
406. CONG. REG. S1622 (daily ed. Feb. 24, 1983). In an impassioned speech which followed, Senator Danforth recounted a story of a drunk driver who was ordered make reparations in the amount of $600,000 to the families of three teenagers who were killed and subsequently escaped civil liability by immediately filing for bankruptcy protection. The legislation proposed by Senator Danforth would have provided: (e) Any injury resulting in a judgment based upon liability of the debtor where, in connection with such liability such debtor was found to have operated a motor vehicle while legally intoxicated shall be deemed to be a willful and malicious injury for purposes of subsection (a)(6) of this section. S. 605, 98th Cong., 1st Sess. (1983).
407. For an analysis of § 523(a)(6), see supra notes 287-312 and accompanying text.
408. Compare State Farm Mut. Auto. Ins. Co. v. Fielder (In re Fielder), 799 F.2d 656, 660-61 (11th Cir. 1986), and In re Adams, 761 F.2d 1422,1426 (9th Cir. 1985), and In re Galvan, 39 B.R. 663, 665 (D. Colo. 1984), and Long v. Greenwell (In re Greenwell), 23 B.R. 419, 421 (S.D. Ohio 1982), and Caldarelli v. Callaway (In re Callaway), 41 B.R. 341, 346 (Bankr. E.D. Pa. 1984), and Burns v. Cloutier (In re Cloutier), 33 B.R. 18, 20 (Bankr. D. Me. 1983), and Brawner v. Askew (In re Askew), 22 B.R. 641, 643 (Bankr. M.D. Ga. 1982), aff'd without opinion, 705 F.2d 462 (11th Cir. 1983) (authority holding that a debtor's intention to operate a motor vehicle while legally intoxicated constituted a willful and malicious injury within the meaning of § 523(a)(6)), with Cassidy v. Minihan, 794 F.2d 340, 343-44 (8th Cir. 1986), and Farmers Ins. Group v. Compos (In re Compos), 768 F.2d 1155, 1158 (10th Cir. 1985), and In re Maney, 23 B.R. 61, 62 (Bankr. W.D. Okla. 1982), and Castiglia v. Morgan (In re Morgan), 22 B.R. 38, 39 (Bankr. D. Neb. 1982), and Heritage Mut. Ins. Co. v. Naser (In re Naser), 7 B.R. 116, 118 (Bankr. W.D. Wis. 1980), and Williams v. Bryson (In re Bryson), 3 B.R. 593, 596 (Bankr. N.D. Ill. 1980) (authority requiring an intent to injure in order to satisfy the mens rea requirement of § 523(a)(6)).
409. 11 U.S.C. § 523(a)(9) (1988) (superseded). The language that ultimately became § 523(a)(9) was originally proposed by Senators Thurmond and Dole and added as an amendment to Senate Bill 445, the Omnibus Bankruptcy Improvements Act of 1983, and was essentially a modified version of the bill originally introduced by Senator Danforth. Although the Omnibus Act was not enacted and § 523(a)(9) was eventually enacted as part of the Federal Judgeship Act of 1984, some of the legislative remarks of the various congressman surrounding the statute are as follows: Also contained in this package is a modified version of a bill introduced by Senator Danforth which provides that a debt incurred as a result of an act of drunk driving is not dischargeable . . . . By making such debts nondischargeable, we can protect victims of the drunk driver and deter drunk driving . . . . [T]his amendment [will] prevent the discharge of judgments or claims where the debtor's operation of a motor vehicle while legally intoxicated were to occur.
410. CONG. REC. S5362 (daily ed., April 27, 1983) (statement of Senator Heflin). Representative Rodino, Chair of the House Committee on the Judiciary, indicated that § 523(a)(9) "clarifies present law relating to the nondischargeability of debts incurred by drunk drivers. Debts incurred by persons driving while intoxicated are presumed to be willfully and maliciously incurred under this provision." 130 CONG. REC. H7489 (daily ed., June 29, 1984), reprinted in 1984 U.S.C.C.A.N. 576, 577. See id. at S8890 (statement of Senator Dole); id. at H7492 (statement of Representative Sawyer). Under present law, a debt that is the result of a tortious act - such as a judgment against the debtor as the result of an automobile accident - is non-dischargeable only if the debt is the result of a "willful and malicious injury" to the property or person of another. In most states, an injury resulting from an act of drunk driving will support a finding only of negligence on the part of the driver. Thus, more often than not, the debt is discharged - unless the bankruptcy court finds that the act of drunk driving was a willful and malicious act by the nature of the circumstances surrounding it. This bill will help deter drunk driving, and protect the victims of the drunk driver, by making such debt non-dischargeable in bankruptcy. Where a debt was incurred by the debtor as a result of an act of drunk driving, that debt will not be dischargeable regardless of any court finding that willful, wanton, or reckless behavior was or was not involved. S. REP. NO. 98-65, at 43-44 (1983) (Senate Judiciary Committee Report which accompanied the Omnibus Act).
411. CONG. REC. S5362 (daily ed., April 27, 1983) (statement of Senator Heflin). Representative Rodino, Chair of the House Committee on the Judiciary, indicated that § 523(a)(9) "clarifies present law relating to the nondischargeability of debts incurred by drunk drivers. Debts incurred by persons driving while intoxicated are presumed to be willfully and maliciously incurred under this provision." 130 CONG. REC. H7489 (daily ed., June 29, 1984), reprinted in 1984 U.S.C.C.A.N. 576, 577. See id. at S8890 (statement of Senator Dole); id. at H7492 (statement of Representative Sawyer). Under present law, a debt that is the result of a tortious act - such as a judgment against the debtor as the result of an automobile accident - is non-dischargeable only if the debt is the result of a "willful and malicious injury" to the property or person of another. In most states, an injury resulting from an act of drunk driving will support a finding only of negligence on the part of the driver. Thus, more often than not, the debt is discharged - unless the bankruptcy court finds that the act of drunk driving was a willful and malicious act by the nature of the circumstances surrounding it. This bill will help deter drunk driving, and protect the victims of the drunk driver, by making such debt non-dischargeable in bankruptcy. Where a debt was incurred by the debtor as a result of an act of drunk driving, that debt will not be dischargeable regardless of any court finding that willful, wanton, or reckless behavior was or was not involved. S. REP. NO. 98-65, at 43-44 (1983) (Senate Judiciary Committee Report which accompanied the Omnibus Act).
412. CONG. REC. S5362 (daily ed., April 27, 1983) (statement of Senator Heflin). Representative Rodino, Chair of the House Committee on the Judiciary, indicated that § 523(a)(9) "clarifies present law relating to the nondischargeability of debts incurred by drunk drivers. Debts incurred by persons driving while intoxicated are presumed to be willfully and maliciously incurred under this provision." 130 CONG. REC. H7489 (daily ed., June 29, 1984), reprinted in 1984 U.S.C.C.A.N. 576, 577. See id. at S8890 (statement of Senator Dole); id. at H7492 (statement of Representative Sawyer). Under present law, a debt that is the result of a tortious act - such as a judgment against the debtor as the result of an automobile accident - is non-dischargeable only if the debt is the result of a "willful and malicious injury" to the property or person of another. In most states, an injury resulting from an act of drunk driving will support a finding only of negligence on the part of the driver. Thus, more often than not, the debt is discharged - unless the bankruptcy court finds that the act of drunk driving was a willful and malicious act by the nature of the circumstances surrounding it. This bill will help deter drunk driving, and protect the victims of the drunk driver, by making such debt non-dischargeable in bankruptcy. Where a debt was incurred by the debtor as a result of an act of drunk driving, that debt will not be dischargeable regardless of any court finding that willful, wanton, or reckless behavior was or was not involved. S. REP. NO. 98-65, at 43-44 (1983) (Senate Judiciary Committee Report which accompanied the Omnibus Act).
413. CONG. REC. S5362 (daily ed., April 27, 1983) (statement of Senator Heflin). Representative Rodino, Chair of the House Committee on the Judiciary, indicated that § 523(a)(9) "clarifies present law relating to the nondischargeability of debts incurred by drunk drivers. Debts incurred by persons driving while intoxicated are presumed to be willfully and maliciously incurred under this provision." 130 CONG. REC. H7489 (daily ed., June 29, 1984), reprinted in 1984 U.S.C.C.A.N. 576, 577. See id. at S8890 (statement of Senator Dole); id. at H7492 (statement of Representative Sawyer). Under present law, a debt that is the result of a tortious act - such as a judgment against the debtor as the result of an automobile accident - is non-dischargeable only if the debt is the result of a "willful and malicious injury" to the property or person of another. In most states, an injury resulting from an act of drunk driving will support a finding only of negligence on the part of the driver. Thus, more often than not, the debt is discharged - unless the bankruptcy court finds that the act of drunk driving was a willful and malicious act by the nature of the circumstances surrounding it. This bill will help deter drunk driving, and protect the victims of the drunk driver, by making such debt non-dischargeable in bankruptcy. Where a debt was incurred by the debtor as a result of an act of drunk driving, that debt will not be dischargeable regardless of any court finding that willful, wanton, or reckless behavior was or was not involved. S. REP. NO. 98-65, at 43-44 (1983) (Senate Judiciary Committee Report which accompanied the Omnibus Act).
414. Stackhouse v. Hudson (In re Hudson), 859 F.2d 1418, 1420 (9th Cir. 1988). Contra General Accident Ins. Co. v. Cain (In re Cain), 96 B.R. 115, 117 (Bankr. N.D. Ohio 1988) (discharging obligations since no state court action was commenced to obtain a judgment and opining that Congress did not intend to have bankruptcy used to try drunk-driving cases); In re Jackson, 77 B.R. 120, 124 (Bankr. N.D. Ohio 1987) (concluding that a civil action must at least have been commenced in state court prior to the bankruptcy in order for a debt to be determined to be nondischargeable).
415. Hudson, 859 F.2d at 1420.
416. See, e.g., id. 1420-21; Jones v. Hager (In re Jones), 80 B.R. 974, 976 (W.D. Mo. 1987) (refusing to emasculate congressional intent by inserting into the statute "a nonexistent requirement, i.e., that the judgment required by § 523(a)(9) must have been obtained before the debtor files a bankruptcy petition"); Thomas v. Ganzer (In re Ganzer), 54 B.R. 75, 76-77 (Bankr. D. Minn. 1985) (consolidating two cases involving identical issues and concluding that the court must look beyond what appears to be the literal language of the statute in order to effectuate public policy and the overall purpose of § 523(a)(9); a reasonable interpretation of § 523(a)(9) permits the judgment or decree to be entered postpetition and, accordingly, the automatic stay should be lifted in order to liquidate the claim).
417. See, e.g., Steiger v. Clark County (In re Steiger), 159 B.R. 907, 912-13 (B.A.P. 9th Cir. 1993) (finding that a judgment of restitution imposed as part of a criminal sentence to be nondischargeable despite the fact that no civil judgment had been obtained). But see, e.g; In re Gonzales, Adv. No. 84-0486 (Bankr. E.D. Wis. Sept. 4, 1985) (unpublished opinion) (finding a conviction emanating from a plea bargain of no contest failed to satisfy the specific language of § 523(a)(9)).
418. See, e.g., Lugo v. Paulsen, 886 F.2d 602, 610-11 (3d Cir. 1989) (finding surcharges imposed upon all drivers convicted of DWI that were used to fund an insurance underwriting association to be nondischargeable).
419. See Whitson v. Middleton, 898 F.2d 950, 953 (4th Cir. 1990).
420. See Criminal Victims Protection Act of 1990, Pub. L. No. 101-581, 104 Stat. 2865.
421. 11 U.S.C. § 523(a)(9) (1994).
422. S. REP. NO. 101-434, at 5-6 (1990), reprinted in 1990 U.S.C.C.A.N. 4065, 4068-70.
423. See, e.g., Wiggins v. Harper (In re Wiggins), 180 B.R. 676, 681 (M.D. Ala. 1995); Moore v. Brisson (In re Brisson), 186 B.R. 205, 207 (Bankr. E.D. Va. 1995); Metro Gov't v. Williams (In re Williams), 175 B.R. 17, 19-20 (Bankr. M.D. Tenn. 1994); Roberts v. Spencer (In re Spencer), 168 B.R. 142, 145 (Bankr. N.D. Tex. 1994); In re Higgins, 161 B.R. 993, 995 (Bankr. W.D. Mo. 1994). This is not to say that creditors have absolutely no recourse against debtors for property damage obligations caused by the unlawful operation of a motor vehicle. Creditors, who are successful at meeting the stringent causation and mens rea requirements, may have such obligations excepted from the debtor's discharge under § 523(a)(6). See supra notes 287-312 and accompanying text.
424. See Hoehn v. Taneff (In re Taneff), 172 B.R. 744, 747 (Bankr. W.D.N.Y. 1994) (indicating that a dram shop liability claim against the individual who served alcohol to the driver of vehicle cannot serve as a basis for nondischargeability under § 523(a)(9) since the statute only references a debtor-driver); Gray v. Lewis (In re Lewis), 77 B.R. 972, 973 (Bankr. S.D. Fla. 1987) (holding that the requirement of "debtor's operation of a motor vehicle" could not be imputed to debtor-father who lent his car to his daughter who caused an alcohol-related injury).
425. Hamre v. Brozek (In re Brozek), Adv. No. 4-93-99, 1993 WL 452670, at *1 (Bankr. D. Minn. Oct. 26, 1993). A party cannot escape the application of the exception simply because he or she pleads guilty to a criminal charge other than D.W.I, or D.U.I. Id. at *3.
426. Whitson v. Middleton, 898 F.2d 950, 952 (4th Cir. 1990); Spencer, 168 B.R. at 145-46 (opining that the court must apply state law when determining legal intoxication for purposes of § 523(a)(9)).
427. Whitson, 898 F.2d at 953; Wiggins, 180 B.R. at 680 (concluding that legal intoxication does not have to be adjudicated in state court in order to establish a ground for nondischargeability under § 523(a)(9)).
428. See Whitson, 898 F.2d at 953; Wiggins, 180 B.R. at 681; Commercial Union Ins. Co. v. Christiansen (In re Christiansen), 80 B.R. 481, 482 (W.D. Mo. 1987); Radivoj v. Williams (In re Williams), 101 B.R. 356, 359 (Bankr. S.D. Fla. 1989) (indicating the legal intoxication under state law could be demonstrated by sufficient circumstantial evidence).
429. 11 U.S.C. § 523(a)(9) (1994) (emphasis added). See generally S. REP. NO. 101-434, at 7 (1990), reprinted in 1990 U.S.C.C.A.N. 4065, 4070-71.
430. 11 U.S.C. § 523(a)(9) (emphasis added).
431. See, e.g., Boyce v. Greenway (In re Greenway), 71 F.3d 1177 (5th Cir.), cert. denied, 116 S. Ct. 2499 (1996); In re Fall, 192 B.R. 16 (Bankr. D.N.H. 1995) (authority holding that Congress did not intend the term "motor vehicle" to include motorboats).
432. Id. (quoting Pioneer Inv. Servs. v. Brunswick Assocs., 507 U.S. 380 (1993)).
433. WEBSTER'S NEW WORLD DICTIONARY 887 (3d College ed. 1986). An alternative, more expansive dictionary definition of the term "motor vehicle" can be found. See, e.g., American Heritage Desk Dictionary 629 (1981) ("Any self-propelled motor-powered vehicle that travels on wheels but does not run on rails.").
434. See Greenway, 71 F.3d at 1179 (noting that Chapter 301 of the Transportation Code, 49 U.S.C. § 30102(a)(6) (1994), defines the term "motor vehicle" as "any vehicle driven or drawn by mechanical power manufactured primarily for use on the public streets, roads and highways, but does not include a vehicle operated only on a rail line"). See also Willison v. Race (In re Race), 198 B.R. 740, 743 (W.D. Mo. 1996) (dicta).
435. See, e.g., Willison v. Race, 159 B.R. 857 (Bankr. W.D. Mo. 1993), rev'd, 192 B.R. 949 (W.D. Mo. 1995).
436. See Greenway, 71 F.3d at 1179.
437. See, e.g., Schwartz v. Dunn (In re Dunn), 203 B.R. 414, 416, 417 n.2 (E.D. Mich. 1996) (opining that the bankruptcy court did not err in relying on state law to define the term "motor vehicle"); Willison, 192 B.R. at 949; Williams v. Radivoj, 111 B.R. 361, 362 (S.D. Fla.), aff'g, 101 B.R. 356 (Bankr. S.D. Fla. 1989).
438. Dunn, 203 B.R. at 417 (finding that a reasonable construction of the term "motor vehicle" includes a snowmobile). See S. REP. NO. 101-434, at 1-4 (1990), reprinted in 1990 U.S.C.C.A.N. 4065, 4065-67.
439. H.R. REP. NO.101-647, at 163-65 (1990), reprinted in 1990 U.S.C.C.A.N. 6472, 6569-71 (emphasis added).
440. Williams, 111 B.R. at 362-63. The district court in Willison v. Race, 192 B.R. 949 (W.D. Mo. 1995), rejected the invitation to import the meaning of the term "motor vehicle" given by Congress in other statutes without giving appropriate consideration to the particular context or purpose of those enactments. Id. at 952.
441. See, e.g., Willison v. Race (In re Race), 159 B.R. 857, 860 (Bankr. W.D. Mo. 1993), rev'd, 192 B.R. 949 (W.D. Mo. 1995).
442. H.R. REP. NO. 103-835, at 54 (1994), reprinted in 1994 U.S.C.C.A.N. 3340, 3363.
443. Id.
444. Id.
445. 11 U.S.C. § 523(a)(15) (1994). Section 523(a)(15) provides that a debtor is not discharged of any debt: not of a kind described in paragraph (5) that is incurred by the debtor in the course of a divorce or separation or in connection with a separation agreement, divorce decree or other order of a court of record, a determination made in accordance with State or territorial law by a governmental unit unless - (A) the debtor does not have the ability to pay such debt from income or property of the debtor not reasonably necessary to be expended for the maintenance or support of the debtor or a dependent of the debtor and, if the debtor is engaged in business, for the payment of expenditures necessary for the continuation, preservation, and operation of such business; or (B) discharging such debt would result in a benefit to the debtor that outweighs the detrimental consequences to a spouse, former spouse, or child of the debtor. Id.
446. See, e.g., Bodily v. Morris (In re Morris), 193 B.R. 949 (Bankr. S.D. Cal. 1996); Belcher v. Owens (In re Owens), 191 B.R. 669, 674 (Bankr. E.D. Ky. 1996); Slover v. Slover (In re Slover), 191 B.R. 886, 892 (Bankr. E.D. Okla. 1995).
447. See, e.g., Beasley v. Adams (In re Adams), 200 B.R. 630, 634 (N.D. Ill. 1996); Shellem v. Koons (In re Koons), 206 B.R. 768, 773 (Bankr. E.D. Pa. 1997); In re Cleveland, 198 B.R. 39, 398-400 (Bankr. N.D. Ga. 1996). But see, e.g., Craig v. Craig (In re Craig), 196 B.R. 305 (Bankr. E.D. Va. 1996); Christison v. Christison (In re Christison), 201 B.R. 298 (Bankr. M.D. Fla. 1996); Gantz v. Gantz (In re Gantz), 192 B.R. 932 (Bankr. N.D. Ill. 1996); Carter v. Carter (In re Carter), 189 B.R. 521 (Bankr. M.D. Fla. 1995). When the debtor has acquired new family obligations due to a remarriage, this factor should also be considered.
448. For an analysis of § 523(a)(5), see supra notes 249-286 and accompanying text.
449. Section 523(a)(15) does not, however, contain any express deadlines, dates or measuring points for making an assessment of the debtor's disposable income. The courts, therefor, have not been altogether consistent on the appropriate point in time to measure the debtor's income. Compare Becker v. Becker (In re Becker), 185 B.R. 567, 570 (Bankr. W.D. Mo. 1995) (time of petition), with Jodoin v. Samayoa (In re Jodoin), 209 B.R. 132, 141-42 (B.A.P. 9th Cir. 1997), and Morris, 193 B.R. at 949, and Taylor v. Taylor (In re Taylor), 191 B.R. 760, 766-67 (Bankr. N.D. Ill.), aff'd, 199 B.R. 37 (N.D. Ill. 1996), and Collins v. Hesson (In re Hesson), 190 B.R. 229, 238 (Bankr. D. Md. 1995) (time of trial), and Hill v. Hill (In re Hill), 184 B.R. 750, 754 (Bankr. N.D. Ill. 1995) (date of complaint).
450. See, e.g., Jodoin, 209 B.R. at 140; Crossett v. Windom (In re Windom), 207 B.R. 1017, 1020 (Bankr. W.D. Tenn. 1997); Straub v. Straub (In re Straub), 192 B.R. 522, 528-29 (Bankr. D.N.D. 1996) ("Section 523(a)(15)(A) does not restrict the court's inquiry to a 'present' ability to pay the debt nor should it, since to impose or imply such a restriction would in many, if not most cases render the provision's objective a nullity.").
451. See Wellner v. Clark (In re Clark), 207 B.R. 651, 655 (Bankr. E.D. Mo. 1997); Armstrong v. Armstrong (In re Armstrong), 205 B.R. 386, 391 (Bankr. W.D. Tenn. 1996). An approach which assesses the debtor's future prospects can serve as a practical check where parties to a divorce have been known to sacrifice their own financial well-being in order to spite their former spouse. Moreover, a totality of the circumstances approach which considers future financial prospects is more consonant with the purpose of the statute and the disposable income tests of Chapters 12 and 13.
452. See supra note 394.
453. See Comisky v. Comisky (In re Comisky), 183 B.R. 883, 884 (Bankr. N.D. Cal. 1995). See also In re Smither, 194 B.R. 102, 109 (Bankr. W.D. Ky. 1996).
454. See, e.g., Taylor, 191 B.R. at 766.
455. See, e.g., 11 U.S.C. §§ 523(a)(5), (7) (1994) (rendering obligations nondischargeable "to the extent" they represent the kind of debt specified in the provision).
456. Soforenko v. Soforenko (In re Soforenko), 203 B.R. 853, 863 (Bankr. D. Mass. 1997).
457. 11 U.S.C. § 523(a)(15)(B).
458. H.R. REP. NO. 103-835, at 54 (1994), reprinted in 1994 U.S.C.C.A.N. 3340, 3363.
459. The inquiry has been characterized by one court as follows: Section 523(a)(15)(B) requires this Court to exercise its pure equitable powers. To apply this section as Congress intended, this Court must in essence evaluate the lifestyles of the parties and measure the benefit of [the] discharge against the degree of harm suffered by the former [spouse]. The legislative history of this section essentially requires this Court to make a value judgment in deciding which party suffers the most. It is in this area that courts have had the most difficulty discerning standards for guidance. With little direction from Congress and no analogous provision elsewhere in the Bankruptcy Code, a variety of standards, often collectively articulated as a "totality of the circumstances" test, have emerged to determine dischargeability, leaving judges adrift and practitioners puzzled about which standards prevail. Phillips v. Phillips (In re Phillips), 187 B.R. 363, 369 (Bankr. M.D. Fla. 1995) (footnotes omitted).
460. See, e.g., Crossett v. Windom (In re Windom), 207 B.R. 1017, 1023 (Bankr. W.D. Tenn. 1997); Hill v. Hill (In re Hill), 184 B.R. 750, 756 (Bankr. N.D. Ill. 1995).
461. See, e.g., In re Silvers, 187 B.R. 648, 650 (Bankr. W.D. Mo. 1995). Perhaps one of the most graphic examples of the significance associated with the allocation of burdens under § 523(a)(15) can be demonstrated by the following passage: Here we have two equally good people with equal inability to pay. Since debtor has sustained her burden of going forward and demonstrated her inability to pay the disputed bills from income which is not reasonably necessary for the support of debtor and the minor children, she must prevail in this adversary action. Id.
462. See supra notes 33-34 and accompanying text.
463. See, e.g., Long v. West (In re Long), 794 F.2d 928, 930 (4th Cir. 1986).
464. See Stone v. Stone (In re Stone), 199 B.R. 753 (Bankr. N.D. Ala. 1996) (collecting cases).
465. See Jodoin v. Samayoa (In re Jodoin), 209 B.R. 132,141 (B.A.P. 9th Cir. 1997); Shellem v. Koons (In re Koons), 206 B.R. 768, 772 (Bankr. E.D. Pa. 1997); Wynn v. Wynn, 205 B.R. 97, 101 (Bankr. N.D. Ohio 1997); Collins v. Florez (In re Florez), 191 B.R. 112, 115 (Bankr. N.D. Ill. 1995) (collecting cases); In re Becker, 185 B.R. 567 (Bankr. W.D. Mo. 1995).
466. Brennick v. Brennick (In re Brennick), 208 B.R. 613, 615 (Bankr. D.N.H. 1997); Straub v. Straub (In re Straub), 192 B.R. 522, 527 (Bankr. D.N.D. 1996).
467. See, e.g., Wolfe v. McCartin (In re McCartin), 204 B.R. 647, 654 (Bankr. D. Mass. 1996); Campbell v. Campbell (In re Campbell), 198 B.R. 467, 471 (Bankr. D.S.C. 1996); Hill v. Hill (In re Hill), 184 B.R. 750 (Bankr. N.D. Ill. 1995). A significant procedural issue should be noted. Rule 7008(c) of the Federal Rules of Bankruptcy Procedure requires a party to set forth all affirmative defenses in its pleading. FED. R. BANKR. P. 7008(c). There is a risk that a failure to raise an affirmative defense may constitute a waiver. See generally 5 CHARLES A. WRIGHT & ARTHUR R. MILLER, FEDERAL PRACTICE AND PROCEDURE § 1278 (1990). It is therefore prudent practice for a defendant-debtor to plead § 523(a)(15)(A) and (B) as affirmative defenses in the answer to the complaint.
468. See, e.g., Scigo v. Scigo (In re Scigo), 208 B.R. 470, 473 (Bankr. D. Neb. 1997).
469. See, e.g., Marquis v. Marquis (In re Marquis), 203 B.R. 844, 847 (Bankr. D. Me. 1997); Willey v. Willey (In re Willey), 198 B.R. 1007 (Bankr. S.D. Fla. 1996); Dressier v. Dressler (In re Dressler), 194 B.R. 290, 302-03 (Bankr. D.R.I. 1996); Greenwalt v. Greenwalt (In re Greenwalt), 200 B.R. 909 (Bankr. W.D. Wash. 1996); Kessler v. Butler (In re Butler), 186 B.R. 371, 373-74 (Bankr. D. Vt. 1995).
470. 498 U.S. 279, 291 (1991). See supra note 34 and accompanying text.
471. See, e.g., Greenwalt, 200 B.R. at 913.
472. See, e.g., Douglas v. Douglas (In re Douglas), 202 B.R. 961, 965 (Bankr. S.D. Ill. 1996); Morris v. Morris (In re Morris), 197 B.R. 236,243 (Bankr. N.D. W. Va. 1996); Collins v. Hesson (In re Hesson), 190 B.R. 229, 239 (Bankr. D. Md. 1995). Cf. Silvers v. Silvers (In re Silvers), 187 B.R. 648, 649 (Bankr. W.D. Mo. 1995) (indicating that "the burden of going forward, not the burden of proof, shifts to the debtor").
473. See generally In re Chalkley, 1995 WL 242314 n.1 (9th Cir. 1995) (unpublished opinion) (opining that questions regarding whether a particular obligation is actually in the nature of support or more properly represents a division of property "will . . . generally no longer arise in bankruptcies filed on or after" the effective date of the Bankruptcy Reform Act of 1994).
474. See In re Smither, 194 B.R. 102, 106 (Bankr. W.D. Ky. 1996) (finding the statute to be "a paving stone on the road to the region of Hades reserved for litigation nightmares"); Gantz v. Gantz (In re Gantz), 192 B.R. 932, 937 (Bankr. N.D. Ill. 1996) (opining that the statute is "a formidable challenge"); Taylor v. Taylor (In re Taylor), 191 B.R. 760, 765 (Bankr. N.D. Ill.), aff'd, 199 B.R. 37 (N.D. Ill. 1996) (finding the statute to be "clearly in need of legislative remediation and clarification"); Butler, 186 B.R. at 372 (describing the statute to be the "equivalent to applying acupuncture without a license").