Available at: www.ablj.org/the-supreme-court-and-the-discharge-of-debts-in-consumer-bankruptcy-cases-vol-99-issue-2-pdf/
Abstract:
The article examines the U.S. Supreme Court’s eleven decisions on the exceptions to discharge under Bankruptcy Code section 523(a). This jurisprudence is predictable in its focus on statutory text and at the same time remarkable for its almost complete aversion to bankruptcy policy. The limits of a bankruptcy jurisprudence without bankruptcy policy are clearly exposed in the Court’s most recent decision on the exceptions to discharge, Bartenwerfer v. Buckley, where the Court ignored the fundamental bankruptcy policy of granting a discharge to honest but unfortunate debtors, holding that an innocent debtor could not discharge a fraud debt for which she was vicariously liable under state law.
Summary:
Scott Norberg’s article, The Supreme Court and the Discharge of Debts in Consumer Bankruptcy Cases, surveys the eleven post-1978 Supreme Court decisions interpreting the scope of the discharge, nearly all arising under § 523(a). He finds the Court’s approach to be highly textualist, with a near total disregard for bankruptcy policy. While the Court occasionally mentions the “fresh start” for “honest but unfortunate debtors,” it has not treated that policy as a guiding canon. Instead, the Justices have relied on statutory text, context, and statutory history—while generally avoiding legislative history.
The article emphasizes two themes:
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Bad Acts vs. Other Exceptions – Norberg distinguishes the “bad acts” exceptions (§ 523(a)(2), (4), and (6)) from the rest. Unlike tax, student loan, or support debts (which protect a creditor’s identifiable interest in repayment), the bad-acts exceptions function like § 727(a) objections to discharge: they target dishonest debtors and limit relief to those who truly deserve a fresh start.
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Creditor-Friendly Results – In eight of eleven cases (seven of nine involving bad acts), the Court sided with creditors, narrowing discharge and limiting fresh starts. Yet, the Court has not articulated a pro-creditor interpretive principle. Rather, it portrays itself as neutral, though its pattern suggests a corrective against perceived pro-debtor lower court rulings.
Norberg critiques Bartenwerfer v. Buckley (2023), where the Court held that a debtor could not discharge a fraud debt based solely on vicarious liability for her partner’s fraud. He argues that the Court missed the crucial policy link between § 727(a) and § 523(a): the bad-acts exceptions are about the debtor’s character, not about privileging the fraud creditor’s repayment interests. By ignoring this, the Court imposed nondischargeability on an innocent debtor, undermining the principle that bankruptcy relief should be reserved for the “honest but unfortunate.”
The article also observes the influence of non-legal factors: the Solicitor General almost always sided with creditors, and the Court nearly always followed. The absence of a government agency advancing a bankruptcy-policy perspective (in contrast to the SEC or EPA in their fields) leaves the Court without a counterweight to creditor arguments.
Commentary:
This piece underscores what many consumer lawyers have long felt: the Supreme Court’s bankruptcy jurisprudence is neither guided by coherent bankruptcy policy nor animated by concern for struggling families. Instead, the Court clings to textualism while quietly narrowing the discharge.
Norberg’s critique of Bartenwerfer is particularly apt. By allowing nondischargeability based on vicarious liability, the Court ignored the foundational principle that the discharge is meant for the “honest but unfortunate.” If the debtor herself acted without fraud, why should her future be burdened forever? In practice, this decision empowers creditors to weaponize state-law agency theories against debtors who never intended, or even knew of, the misconduct.
For practitioners, the takeaway is stark: do not assume the Court will apply bankruptcy’s core policy of fresh starts. Instead, expect strict readings of statutory text that often tilt toward creditors. For debtors’ counsel, that means more vigilance in contesting nondischargeability complaints and more creativity in using Chapter 13, where Congress initially excluded the bad-acts exceptions.
Professor Norberg also highlights the systemic problem: without a federal agency advocating for bankruptcy policy before the Court, debtors stand alone against institutional creditors and a DOJ-aligned Solicitor General. He notes that Professor Mann has written that:
The absence of a major administrative presence in the Executive Branch has hindered the development of a broad and coherent bankruptcy system. Specifically, the administrative vacuum has left the Supreme Court adrift, under informed about the importance of a robust bankruptcy system to a modern capitalist economy. BANKRUPTCY AND THE U.S. SUPREME COURT (Cambridge University Press 2017)).
Professor Mann further observes that “[t]he Solicitor General’s role in bankruptcy cases has been almost diametrically opposed to the role we would have expected from [a hypothetical] United States Bankruptcy Administration: We don’t have a Court left to its own devices in the bankruptcy realm, we have a Court consistently advised by the executive to downplay the significance of the bankruptcy system.”
This critique resonates especially in the Fourth Circuit, where the Bankruptcy Administrator system—independent of the Department of Justice—offers at least a measure of structural separation. (Whether bankruptcy judges like to treat the BA as their stand-in is another question.) By contrast, the U.S. Trustee Program, as a DOJ arm, too often reflects prosecutorial instincts rather than the balanced policy judgments bankruptcy demands.
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