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The Bankruptcy Code makes most debt dischargeable under 11 USC 523(a)(15)(A) and (B) except for certain obligations arising from divorce settlements, including child support, maintenance and alimony pursuant to section 523(a)(5). Section 523(a)(15)(A) also allows a debtor to not pay support, maintenance and alimony if debtors will suffer more than their creditors will benefit from payments. Debt owed to one ex-spouse by another may be dischargeable if the debt reflects a typical debitor/creditor transaction and does not arise from the marriage relationship.

Certain divorce debts are dischargeable under 11 USC 523(a)(15) but courts have struggled in developing a consistent criteria for its application. Courts will apply section 523(a)(15) when a decree of dissolution possesses a "hold harmless" provision. Courts differ however, on the tests to apply to determine debtors' ability to pay, on balancing equities and on applying remedies.

The uphill battle for clients discharged in bankruptcy but facing IRS claims for prebankruptcy income tax deficiencies may best be fought by referring such clients to lawyers specializing in offers in compromise and recent bankruptcies. Three 1997 cases exhibit the unwillingness of either the Bankcruptcy Courts or the Tax Court to consider the issue as a whole. The Tax Court refuses to determine the issue of discharge while re-examination of a bankruptcy judgement is often not an option.

The US Courts of Appeals differ in their interpretation of Bankruptcy Code section 523(a)(2)(A) and whether punitive damages for fraud are exempt from discharge. The prevailing view has been that such punitive damages are dischargeable, but decisions since 1993 have been arguing they are not. The US Court of Appeals for the 3d Circuit ruled in In re Cohen that nothing in the Bankruptcy code section limited nondischargeable damages to compensatory damages alone. The US Supreme Court has yet to rule on this issue.

A debtor's failure to carry automobile or workers' compensation insurance, or other insurance required by state law, is not sufficient grounds to deny discharge of debt under the Bankruptcy Code. Congress intended that there be few exceptions to this concept, but courts have misapplied the "willful and malicious injury" terminology in the statute in order to aid injured creditors. The phrase should be applied only to intentional harm done by debtors, so courts should adopt a strict interpretation of this phrase.

The resolution of tax collection issues arising in bankruptcy cases is the main thrust of several proposals being studied by the National Bankruptcy Review Commission. The proposals address areas such as declaratory judgments, burden of proof, payment procedures, and discharge. Debtors would prefer to pursue tax litigation in bankruptcy court since they are more likely to prevail there on tax questions.

Imposing liability on successor corporations when bankruptcy preceded the corporate transfer would not offend bankruptcy principles that are intended to provide the debtor with a fresh start. A successor liability action against an asset-purchasing successor is not a claim under bankruptcy law and is therefore not automatically discharged. In those instances when successor liability would otherwise attach, such as when consented to or when a sham transaction is found, bankruptcy law does not operate to insulate successor corporations.

Punitive damage judgments should be discharged by bankruptcy courts based on the policy that such awards are intended to punish but not to bankrupt. Courts considering punitive damage discharge under section 523(a)(6) of the Bankruptcy Code tend to weigh the chance to give the debtor a fresh start with the fact that discharge is a privilege to be earned. The policy motivations of punitive damages are to punish for societal harm and not to compensate. Society's interest in granting the debtor a fresh start should be paramount to any windfalls granted to punitive damage claimants.

A minor amendment to Federal Rule of Bankruptcy Procedure 4004(b) could eliminate an awkward problem raised by the interaction of Bankruptcy Rule 4004(a) and 11 USC Section 727(d) and (e). These rules ignore what happens if a ground for denying discharge of a bankruptcy is discovered before the discharge is entered but after the complaint deadline has passed. Bankruptcy Rule 4004(b) could be amended to say that after the deadline the discharge shall 'be deemed granted' rather than 'be forthwith granted,' thus eliminating the gap between granting and entering the discharge.

The majority view that nondischargeability follows the debt when the debt was incurred fraudulently is inconsistent with the legislative history of the Bankruptcy Code of 1978. A majority of courts have ruled that debts in bankruptcy incurred fraudulently by one partner can be imputed to another partner under state agency law. Analysis of the legislative history and the text of the Bankruptcy Code indicates that Congress did not intend that debts be nondischargeable unless the debtor committed actual fraud. The courts should attach nondischargeability to the defrauding debtor not the debt.

Taxpayers may have tax-related government claims (i.e., individual taxes, penalties and interest) forgiven (discharged) in bankruptcy by filing a bankruptcy petition at the proper time. However, haphazard results will occur [...]