9th Cir. Published - Court determined that BK Court can award money damages in objection to discharge proceeding

The panel adopted the BAP’s opinion as its own. The BAP held that, even after Stern v. Marshall, 131 S.Ct. 2594 (2011), the bankruptcy court had the constitutional authority to enter a final judgment determining both the amount of the Fords’ damage claims against the debtor Shawn Deitz, and determining that those claims were excepted from discharge. The BAP also held that the bankruptcy court did not err in concluding that the debt owed by Deitz to the Fords was nondischargeable under 11 U.S.C. §§ 523(a)(2)(A), (a)(4), and (a)(6).


The panel noted that dischargeability actions are central to federal bankruptcy proceedings and are necessarily resolved during the process of allowing or disallowing claims against the state, and that the dischargeability determination therefore constitutes a public rights dispute that the bankruptcy courts may decide.








In re Deitz (9th Cir. 2014)

9th Cir BAP Vacates and Remands Denial of Discharge back to BK Court to Make Specific Findings of Fact - 9th Cir. BAP - Unpublished 2014

It appears that the Court may have had a bad debtor on its hands and was frustrated with the actions taken by the debtor.  As a result, after a trial on the case, the Court denied the debtor a discharge under 727(a)(5), 727(a)(2) and 727(a)(4)(A).  The problem was that the Court did not make specific findings on the elements of the cause of action. 




727(a)(2) - the Court never determined that the assets that were concealed were property of the Estate.  The Debtor argued that the property belonged to a corporation.


727(a)(5) - Same Issue, the failure to explain the disposition of the assets....the question was were they property of the estate or the corporation.


727(a)(4)(A) - The Court needed to make a determination as to whether the debtor knowingly and fraudulently made a false oath (clearly the statement was false...but knowingly and fraudulently but more importantly the false oath pertained to a prior bankruptcy case and such false statement in the prior case were not actionable in the new case...citing to In re Carter, 125 B.R. 631, 634 (Bankr. D. Utah 1991)?)




In essence, the Court needed to make specific findings to support the denial of the discharge.  I'd suggest that the BK Court will make such findings the second time around.


In re Sethi - 2014 - 9th Cir. BAP

Attorney Fees Incurred by the Debtor in a Divorce Proceeding (simply a debt owed to the attorney) Discharged Because Former Counsel Could Not Meet its Burden (1st Circuit 2014)

Debtor, pre-petition, retained an attorney to proceed in a contentious divorce proceeding.  Counsel was paid an initial $25,000.00 retainer but billed over $60,000.00.  Due to the debt and other circumstances, the client filed bankruptcy.  Former Counsel sued the Client seeking a determination that the debt was not discharged based upon 523(A)(2)(a).  (i.e. the debt was incurred under false pretenses...perhaps a promise to pay)  Former Counsel lost at a bench trial, appealed the case to the BAP, lost and then filed an appeal the 1st Circuit.  The 1st Circuit affirmed.  The Court determined that the Counsel did not prove its case with a preponderance of the evidence.  It seemed like the Debtor was a bad apple and lacked candor but the Court stated:

The attorney argues pejoratively that the debtor

was shown to be a liar and that the debtor's "dishonest and

untrustworthy" testimony undermines the bankruptcy court's

factfinding. This argument is wide of the mark. The bankruptcy

court did not rest its decision on any illusions about the debtor's

veracity. To the contrary, the bankruptcy court found much of her

testimony to be self-serving and not deserving of credence. See

deBenedictis, 2013 WL 1342479, at *2.

Taking this lack of veracity into account, however, it

proceeded to find that the attorney's proof was not preponderant.

See id. at *7-8. We are not aware of any rule that mandates a

finding of nondischargeability against a party simply because her

testimony lacks candor. Although we do not countenance untruthful

testimony, a finding of nondischargeability requires more than a

showing that the debtor exhibited a serious character flaw. The

attorney, who had the burden of proof, made no such additional

showing here


IN RE KAREN A. BRADY-ZELL 1st Circuit 2014