Dischargeability of Debt for “Willful and Malicious Injury”

A central purpose to the filing of a bankruptcy is to provide an individual debtor with the opportunity to discharge their debts and obtain a fresh start. However, not all debts are dischargeable under the Bankruptcy Code. One category of debt which is not dischargeable is a debt “for willful and malicious injury by the debtor to another entity or to the property of another entity. . .” 11 U.S.C. § 523(a)(6). The requirements of “willfulness” and “maliciousness” are distinct requirements and are treated as such by the courts.

The Eleventh Circuit has held that proof of willfulness requires “a showing of an intentional or deliberate act, which is not done merely in reckless disregard of the rights of another.” In re Walker, 48 F.3d 1161 (11^th Cir. 1995) (quoting In re Ikner, 883 F.2d. 986 (11^th Cir 1989). “[A] debtor is responsible for a ‘willful’ injury when he or she commits an intentional act the purpose of which is to cause injury or which is substantially certain to cause injury.” Id. The actor is required to intend the injury, not just the act that leads to the injury. Kawaauhau v. Geiger, 525 U.S. 57 (1998). Recklessly or negligently inflicted injuries are not excepted from discharge under § 523(a)(6). Id.

“Malicious” is defined as “wrongful and without just cause or excessive even in the absence of personal hatred, spite or ill-will.” In re Walker, 48 F.3d 1161 (11^th Cir. 1995). To establish malice, “a showing of specific intent to harm another is not necessary.” In re Ikner, 883 F.2d. 986 (11^th Cir 1989).

In a recent Eleventh Circuit case, the court addressed the issue whether a debt resulting from a fraudulent transfer of property by a co-conspirator constituted a willful and malicious injury under § 523(a)(6). In re Jennings (Maxfield v. Jennings), 670 F.3d 1329 (11^thCir.). The Jennings case originated when a seven year old boy was accidentally shot and rendered a permanent quadriplegic. As a result, a lawsuit was filed against the gun manufacturer and distributor as well as Bruce Jennings, the individual who controlled the gun manufacturer and distributor. A complaint was also filed against Janice Jennings, an ex-wife of Bruce Jennings, alleging claims for fraud, conspiracy and fraudulent transfer. The allegations were that Janice Jennings knowingly participated in the transfer of real property held by entities created by Bruce and Janice Jennings.

Ultimately, a jury found Bruce Jennings liable for damages. However, before a determination could be made on Janice Jennings’ liability, she filed a Chapter 11 bankruptcy, which was later converted to a Chapter 7. The state court case against Janice Jennings was transferred to the bankruptcy court. The bankruptcy court concluded that Janice Jennings knew of Bruce Jenning’s intent to transfer the property in order to keep it out of the hands of the creditors and therefore found that Janice Jennings was a co-conspirator with Bruce Jennings in the fraudulent transfer of the property. Id. Therefore, Janice Jennings was held to be jointly and severally liable for certain damages. Thereafter, the injured boy filed an adversary proceeding seeking to have the damages against Janice Jennings deemed non-dischargeable pursuant to 11 U.S.C. § 523(a)(6). Id. The bankruptcy court dismissed the adversary complaint concluding that a conspiracy claim was not the sort of intentional tort required under § 523(a)(6). Id. at 2. The district court reversed the bankruptcy court and found that under certain circumstances, a co-conspirator could inflict a “willful and malicious” injury. Id. at 3. The district court concluded that Janice Jenning’s active participation in the fraudulent transfer satisfied the requirements of § 523(a)(6). On appeal, the Eleventh Circuit affirmed the district court and found that the injured boy satisfied the elements of § 523(a)(6) by showing that Janice Jennings willfully and maliciously injured his property.

This article was submitted by Marc P. Barmat, Furr and Cohen, P.A., One Boca Place, Suite337 West, 2255 Glades Road, Boca Raton, FL 33431; mbarmat@furrcohen.com