Bankruptcy Debtor's Debt Not Excluded From Discharge Despite Willful Actions -Hidy v. Bullard

August 15, 2011

Our Perris consumer bankruptcy attorneys have made multiple warnings in this space about the potential penalties for misbehavior in the bankruptcy courts. The Eighth U.S. Circuit Court of Appeals decision in Jonathan D. Hidy v. Marty K. Bullard deals with the results of willful and malicious behavior before the bankruptcy is fired. Hidy and Bullard, of Arkansas, were once friends, but Bullard injured Hidy so badly in a physical fight that Hidy lost an eye. Among other consequences was a legal judgment against Bullard for $204,204 for Hidy's personal injury. Bullard later filed for Chapter 7 bankruptcy and discharged the debt. Hidy appealed, arguing that the debt was not dischargeable because the bankruptcy code does not allow discharge of debts stemming from "willful and malicious" behavior.

Sometime before Bullard's 2010 bankruptcy filing, he and Hidy and several other co-workers and friends went out for dinner and drinks, and then to a new restaurant for more drinks. Depending on who tells the story, Bullard got into a discussion with Hidy and a third party, or into an argument with just the third party, when Hidy told him to "watch yourself." Bullard then threw a glass at either the table or Hidy. The glass broke and a piece went into Hidy's eye, and after a short physical fight, they realized this and Hidy went to the hospital. He eventually lost the vision in his right eye. Bullard testified that he lost his job and some friends over the incident and even attempted suicide. He was also convicted of battery and was successfully sued by Hidy. When Bullard later filed for bankruptcy, Hidy filed an adversary action seeking to except the $204,204 debt to him from discharge. Hidy lost that action and filed the instant appeal.

The bankruptcy code excepts debts from discharge when they resulted from "willful and malicious injury by the debtor to another entity or the property of another entity." On appeal, Hidy argued that the bankruptcy court should have decided the willfulness issue based on the criminal or civil cases against Bullard. The Eighth Circuit disagreed, finding that the bankruptcy court was correct to find that the issues in the bankruptcy case were not essential to judgment in the criminal case. Battery can be reckless as well as intentional, the court noted, and under the Supreme Court's 1998 decision in Kawaaihua v. Geiger, this must be a deliberate or intentional injury, not just an unintentional injury that arises from a deliberate or intentional act. It declined to even take up the issue of whether the civil case decided the issue, because the record was too sparse. Finally, the Eighth addressed the underlying issue of whether Hidy had proven that Bullard engaged in "malicious" behavior. Both men's testimony at trial was judged credible, the court noted, and supporting evidence was again too scant to decide. For that reason, it declined to overturn the bankruptcy court and upheld its decisions on appeal.

We rarely see this kind of appeal in our work as Mission Viejo personal bankruptcy lawyers. Most people in bankruptcy don't have a personal injury judgment to discharge, and among those, a dispute over willful and malicious injury doesn't always arise. It's disappointing that the Eighth Circuit did not have the opportunity to make a stronger judgment reaffirming the Kawaaihua ruling that distinguished between injuries arising from negligence and those arising from intentional behavior. This may not seem like much of a difference to people in Hidy's position, but the bankruptcy code makes the debtor's state of mind vital so it can avoid rewarding people who intentionally injured others. As Buena Park individual bankruptcy attorneys, we do our best to help clients put a sad past like this behind them and work toward a better financial future.

If you're considering bankruptcy and you're wondering how the law might affect your particular situation, you should call Howard Law PC for a free, confidential consultation. To set up a meeting or learn more, call us toll-free at 1-800-872-5925 or send us a message online.

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