Kentucky Bankruptcy Law

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“I meant to do it, but I’m really sorry” doesn’t count in bankruptcy

A recented decision by the Bankruptcy Court for the Western District of Kentucky reveals that bankruptcy is not the answer to relieve all debts, especially ones that come about by “willful” acts. In re Marklin, Case # 09-10939(1)(7) (Bankr.W.D.Ky., 2010) tells the tale of a farmer who borrowed over $100,000 to plant a crop. The bank held a security interest in the proceeds of the crop (a security interest is a legal right to get ownership of an asset if the debt isn’t paid). So far, this is all very common farming and banking practice.

Where things went wrong is that Mr. Marklin, with full knowledge that the bank held a security interest in the proceeds, sold the crop but kept all of the money for his own use. Now, I do not know that Mr. Marklin spent the money on luxury items or if he just used it to live off of and keep the farm going. It doesn’t really make a difference; what mattered to the court is that Mr. Marklin knew the security interest was in place but did what he did regardless.

Section 523(a)(6) of the bankruptcy code says that debts “for willful and malicious injury by the debtor to another entity or to the property of another entity” will not be discharged. Ordinarily, this section is thought to refer to the drunk driver who is not allowed to escape the debt of his injury when he wrecks into someone or an embezzler who stole funds. However, it has broader implications. For the person contemplating filing bankruptcy, it means that your intentions matter and that you need to operate in good faith towards creditors.

June 23, 2010 - Posted by | Bankruptcy, Pre-filing planning, Security interests | , , , , , , ,

1 Comment »

  1. […] Kentucky Bankruptcy Blogger Greg Napier has a good blog post on a recent Western District case. The excerpt above is from the blog […]

    Pingback by “I meant to do it, but I’m really sorry” doesn’t count in bankruptcy- Kentucky Bankruptcy Law Blog Post by Lexington Bankruptcy Attorney Greg Napier « Kentucky Bankruptcy Attorney | July 12, 2010 | Reply

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