Supreme Court to hear bankruptcy matter

In the not so distant future, the United States Supreme Court will hear a matter that may impact how Californians pursue Chapter 7 bankruptcy. The matter arose out of a dispute in Georgia between an individual and the law firm that represented him.

The man and the firm made an agreement wherein the firm would represent the man and the man would pay the firm's fees based upon an agreed to structure. When the man began to fall behind on his payments, he and the firm worked out new terms and the firm retained him as a client. While a client of the firm, the man received a tax refund. However, rather than using the refund to pay off his debts to the firm, the man invested the refund in a business that he had started.

The firm eventually demanded repayment of the more than $100,000 in legal fees that the man owed and the firm obtained a judgment against him. The man and his wife then filed for Chapter 7 bankruptcy and the law firm opposed the matter, claiming that the debt the man owed it should not be dischargeable as he committed fraud when he did not use his tax refund to repay the debt.

The Supreme Court will now review if the man's failure to disclose his tax return income is a statement respecting his financial condition and whether that should in turn impact his ability to discharge his debt to the law firm through Chapter 7 bankruptcy.

As this matter plays out, individuals who are considering filing for Chapter 7 bankruptcy may wish to talk to bankruptcy attorneys in their communities to ensure that their financial actions will not inhibit their abilities to pursue protections in the bankruptcy courts. Filing for bankruptcy can be complex, making it imperative that debtors understand their rights, options and how the process with impact them.

Source:, "Supreme Court to Weigh into Clash Over Bankruptcy Code," Dan McCue, Jan. 12, 2018