U.S. Supreme Court

Woman whose husband failed to disclose home defects can't discharge buyer's award in bankruptcy, SCOTUS rules

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A debtor jointly on the hook for a court judgment stemming from her husband’s failure to disclose defects in their renovated home can’t discharge that debt in bankruptcy, the U.S. Supreme Court ruled Wednesday.

The Supreme Court ruled against debtor Kate Bartenwerfer, who was unaware of defects following her husband’s renovation of their jointly owned property. Justice Amy Coney Barrett wrote the unanimous opinion.

The debt couldn’t be discharged under a provision in the U.S. Bankruptcy Code that bars discharge of debt to the extent that it was “obtained by … fraud.”

“The provision obviously applies to a debtor who was the fraudster,” Barrett wrote. “But sometimes a debtor is liable for fraud that she did not personally commit—for example, deceit practiced by a partner or an agent. We must decide whether the bar extends to this situation too. It does. Written in the passive voice, [the Bankruptcy Code provision] turns on how the money was obtained, not who committed fraud to obtain it.”

The homebuyer had obtained a judgment of more than $200,000 against Bartenwerfer and her husband, David, based on allegations that the San Francisco home had a leaky roof, defective windows, a missing fire escape and permit problems.

The case is Bartenwerfer v. Buckley.

Hat tip to Law360, which had coverage of the opinion, and SCOTUSblog, which had breaking news of the ruling.

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