US Supreme Court Agrees to Hear Influential Bankruptcy Case

The Supreme Court of the United States recently agreed to determine the intent of Congress when the section of bankruptcy code was created that determines the discharge of debts associated with dishonest or fraudulent conduct. This case serves as a reminder of the many complicated areas in bankruptcy law. Given these complexities, many people are who are involved with bankruptcy cases have found that it is critical to the outcome of a case to obtain the assistance of a seasoned attorney.

The Background of the Case

The party that originated the class initiated the case against the owners of a business that the party had recently purchased. The party agreed to pay legal counsel on an hourly basis with fees due each month. As the case proceeded, however, the man became delinquent on his payments. These two parties met numerous times to discuss the matter of payment with the legal counsel even reducing the client’s payment despite continued legal representation. In June of 2006, the law firm alleges that the party received a tax refund payment and used this money to make an investment in his business instead of paying outstanding legal fees. When the payment was not made, the legal counsel sued the party in Georgia state court and obtained a judgment of over $104,000. Months later, the man and his wife initiated a bankruptcy action under Chapter 7 to discharge their personal debts.

The Lower Court Decision

The legal counsel then began to pursue an adversary proceeding in the Middle District of Georgia’s bankruptcy court seeking a finding that the party’s debt was not dischargeable because it was obtained by fraud. The party moved to dismiss the complaint by arguing that prohibition on debts being discharged by fraud did not apply.

The 11th Circuit’s Decision

This case, however, eventually reached the 11th Circuit, and the previous findings were reversed. The 11th Circuit court tried to determine if a statement about one asset constitutes a statement respecting the debtor’s financial condition. As a result, the 11th Circuit adopted an interpretation used by the 4th Circuit that had found one statement about an asset can represent a statement about a person’s financial condition. Other Circuit Courts have had different interpretations of how to decide laws in this case. If the representation is found to constitute fraud, then the client will be unable to discharge debt through bankruptcy. On the other hand, if the statement does not constitute fraud, then this decision will be a significant advancement of bankruptcy rights for some individuals.

Speak With an Experienced Bankruptcy Lawyer

Depending on how the Supreme Court decides this case, the future of bankruptcy cases will take a distinct path. As a result, if you are involved in a bankruptcy case in Oklahoma, you likely need the assistance of strong legal counsel to avoid the many complications that can arise. Consider contacting attorney Jim A Lyon for assistance with your bankruptcy case. Mr. Lyon has helped many people navigate the complex issues that arise in bankruptcy cases. Call attorney Lyon today.