Faculty Scholarly Dissemination Grants

Dischargeable or Not Dischargeable: Does an Intentional Breach of Contract Qualify as "Willful and Malicious" Under Section 523(A)(6) of the Bankruptcy Code?

Lara Kressler

Department

School of Accounting

College

Seidman College of Business

Date Range

2010-2011

Abstract

Most bankruptcy students recognize Section 523(A) of the Bankruptcy Code as containing a laundry list of debts that are considered non-dischargeable in Bankruptcy (alimony, child support, student loan debts, etc.). Specifically, Section 523(A)(6) excludes from discharge debts for "willful and malicious injuries by the debtor to another entity." Historically, courts and even text books, have described "willful and malicious" injuries as those caused by intentional torts committed by the debtor. This tort requirement view has been widely accepted until the Fifth Circuit Court of Appeals' recent decision in In Re Williams. In Williams, the Fifth Circuit held that the breach of a contract by a debtor, without any accompanying tort, may be considered willful and malicious if the debtor intended to injure the other party to the contract, or if the injury was substantially certain to result from the breach. This interpretation has created a split with other federal courts, including the Ninth Circuit Court of Appeals, who ascribe to the view that to be excepted from discharge as creating a willful and malicious injury, a breach of contract must be accompanied by a recognized tort. The paper explores the language and context of Section 523(A)(6), analyzes the circuit split and advocates for the adoption of a unified rule requiring tortious conduct to accompany a breach of contract claim in order to make the underlying debt non-dischargeable.

Conference Name

Southern Academy of Legal Studies in Business Annual Conference

Conference Location

San Antonio, TX

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