Yes. A Chapter 7 bankruptcy filing is designed to give the debtor a fresh start and essentially extinguish debts. The ultimate goal is to obtain a discharge from the bankruptcy judge. However, there are some exceptions in the bankruptcy code regarding non-dischargeable debts. According to § 523 of the bankruptcy code some debts are not dischargeable because of the type of debt or because of public policy. Some of the non-dischargeable debts include:
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taxes or customs duties
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alimony and child support
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obtaining money, goods, or services by fraud or falsehood
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obtaining a debt through willful or malicious injury
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death or injury caused by driving under the influence of alcohol or drugs
In a recent opinion, In re Patel, the 6th Circuit Court of Appeals addressed another exception that being for debts incurred from fraud or defalcation while acting in a fiduciary capacity which includes embezzlement and/or larceny. Defalcation is a term used by the bankruptcy court to describe a category of bad acts that taint a debt such that it can not be discharged. The exception for defalcation while acting in a fiduciary capacity was created because of Congress's desire to protect trust relationships such as when the bankrupt is a trustee and the creditor is a trust beneficiary. A debt is non-dischargeable as the result of defalcation when a preponderance of the evidence establishes: (1) a pre-existing fiduciary relationship, (2) a breach of that relationship and (3) a resulting loss.
Jeffrey Herrick