The U.S. Supreme Court doesn’t hear bankruptcy cases very often. But this year the Court does have a bankruptcy case on its docket. The case is called Bullock v. BankChampaign, N.A.
The case is important because of the questions it addresses about what debts can be discharged in a Chapter 7 bankruptcy. Texas and all other states will be affected, because bankruptcy law is federal law.
The Bullock case actually involves two different types of trustees. One is the trustee of an estate. The other is the bankruptcy trustee.
The bankruptcy trustee is responsible for verifying the accuracy of the bankruptcy petition. If there are discrepancies, it’s up to the trustee to resolve them. This sometimes involves seeking out assets that may be hidden, so that they can be included in the petition.
In Bullock, a man became a trustee of a trust created by his father. He then improperly borrowed from the trust, despite a clear provision in the trust instrument that such borrowing was not permitted.
This wrongful borrowing resulted in a legal judgment against the man who did it. He claimed, however, that he had done the borrowing negligently, not with an intent to deprive the trust.
The man then tried to discharge the judgment debt in a Chapter 7 bankruptcy filing. The Supreme Court has agreed to decide whether this discharge is permissible, given the misconduct of the trustee.
In general, debt that is incurred by fraud, malice or intentional harm may not be discharged in bankruptcy. So the Bullock case will clarify what degree of misconduct prevents a debt from being discharged.
Source: “Bullock v. BankChampaign, N.A.,” SCOTUSblog