'Financial Death Sentence': Supreme Court Unanimously Says Your Partner's Fraud Debt Is Yours, Too You can't discharge your partner's debt in the bankruptcy process — even if you didn't know about the fraud.
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The Supreme Court ruled on Wednesday that a woman from California could not (with the bankruptcy process) get out of a debt incurred by a partner through fraud, according to CNBC.
"The court held that a debtor who is liable for her partner's fraud cannot discharge that debt in bankruptcy, regardless of her own culpability," the court said in a summary of the case.
All nine justices supported the decision.
The case began in 2005, when Kate Bartenwerfer and her boyfriend at the time, David Bartenwerfer, (they later married) bought a house and planned to renovate and flip. David took the lead on the project, per the decision, but apparently misled Kate about what he did, as well as the eventual buyer, Kieran Buckley.
"Yet after the house was his, Buckley discovered several defects that the Bartenwerfers had not divulged: a leaky roof, defective windows, a missing fire escape, and permit problems," the decision said.
Buckley then sued the couple and won a $200,000 decision. The couple then filed for bankruptcy, and Kate attempted to get herself out of the debt by saying she had not been involved. The issue wended its way through the courts, but the Supreme court upheld the long precedent on Wednesday.
"We are sensitive to the hardship she faces," Justice Amy Coney Barrett wrote in the opinion. She added that per court precedent and the way the law is written, creditors are more important than people who need a new financial start. "And it is not our role to second-guess that judgment," she added.
Kate Bartenwerfers's legal team tried to argue that the relevant clause in the bankruptcy code and its use of passive voice brought the culpability down to the fraudster itself, which Barett disagreed with.
"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," she wrote in the opinion.
With interest, Bartenwerfer's debt is now $1.1 million, an attorney for the woman said, per CNBC. Another legal representative for Bartenwerfer said during oral arguments that a ruling against her would be a "financial death sentence," according to Bloomberg.
