Bankr. EDNC: Lowther- Dischargeability Determination not bound by Res Judicata

The Debtor was in an automobile accident and had not maintained liability insurance. Judgment was entered in state court for negligence, but after filing Chapter 13 the Plaintiff brought a non-dischargeability action alleging that the failure to maintain liability insurance cause a willful or malicious injury. The Debtor argued that the failure to raise either willfulness or malice in the state court action precluded later raising them in the bankruptcy. Relying on Brown v. Felsen, 442 U.S. 127, 135, 99 S.Ct. 2205, 2211 (1979), the Bankruptcy Court rejected this, holding that "a plaintiff seeking non-dischargeability “[is] not assert[ing] a new ground for recovery, nor does he attack the validity of the prior judgement. Rather, what he is attempting to meet . . . is the new defense of bankruptcy. . . .” Id. at 133....[R]es judicature does not confine bankruptcy courts to the prior state court record and additional evidence may be offered. Id. at 138-139." The Court did, however, find that the negligence finding would preclude a "willful" determination for discharge-ability. The Court noted that had this been a Chapter 7 case, under 11 USC §523(a)(6) the discharge action would have failed, since §523(a)(6) requires that the action be BOTH willful and malicious. Under 11 §1328(a)(4), however, the action need only be EITHER willful or malicious. Accordingly, the question of malice remained. Lowther.PDF