On May 16th, the U.S Supreme Court decided against establishing a narrow interpretation of “actual fraud” in determining whether debts can be discharged through bankruptcy. The Court’s decision overturns a Fifth Circuit decision.
Womble Carlyle attorney Rory Whelehan discussed the Husky International Electronics Inc. v. Ritz decision with Law360.com.
“The US Supreme Court reaffirmed today that the bankruptcy discharge really is for the honest but unfortunate debtor. The Supreme Court expanded the exception to discharge to include those situations where the debtor actively hides assets from creditors but nevertheless never makes any overt statement to the creditor. The common law has always included intentionally fraudulent transfers of assets within the meaning of actual fraud, but such types of improper hiding of assets have never satisfied the actual-fraud exception to discharge under Section 523(a)(2) of the Bankruptcy Code. Today, the Supreme Court disagreed and found that they do,” Whelehan said.
Rory Whelehan is the Practice Group Leader for Womble Carlyle’s Bankruptcy and Creditors’ Rights group. He concentrates his practice primarily on chapter 11 cases and assorted bankruptcy litigation matters as well as out-of-court workouts and debt restructurings. Whelehan has represented all major constituents in chapter 11 cases, including secured creditors, debtors, creditor committees, trade creditors, and equity security holders. He practices in Womble Carlyle’s Greenville office.