Available at:
https://www.journaloffreespeechlaw.org/hampson.pdf
http://blogs.law.ox.ac.uk/oblb/blog-post/2025/09/defamation-bankruptcy-pipeline-united-states-and-around-world
Abstract:
It has never been easier to ‘go viral’. With nothing more than a microphone, a smartphone, and some computer software, an influencer in today’s media landscape can reach millions. But that ease comes with risk: defamation lawsuits are on the rise, sending content creators to bankruptcy courts with judgments that far exceed everything they own. Last year, I analysed this trend in American law, which I call the ‘defamation-to-bankruptcy pipeline’, in Defamation, Bankruptcy & the First Amendment, published in the Journal of Free Speech Law.
Summary:
Christopher Hampson's outstanding article examines an increasingly familiar phenomenon: what he aptly describes as the "defamation-to-bankruptcy pipeline." As social media allows individuals to reach millions with a smartphone and internet connection, defamation verdicts have grown correspondingly larger. The result has been a series of headline-grabbing bankruptcy cases involving figures such as Rudy Giuliani, Alex Jones, and Tasha K (Latasha Kebe), with other high-profile litigants such as Amber Heard raising similar questions about the role bankruptcy may play after enormous judgments.
The article does far more than recount celebrity litigation. It thoughtfully explores the intersection of three areas of law that are rarely discussed together: defamation, bankruptcy, and the First Amendment. Hampson explains how bankruptcy courts determine whether defamation judgments survive discharge, how issue preclusion affects later discharge litigation, and whether bankruptcy's nondischargeability provisions themselves implicate constitutional free speech concerns.
Bankruptcy Is Not a "Magic Wand"
One of the article's central themes is that filing bankruptcy does not automatically eliminate defamation liability. Rather, many defamation judgments may qualify as debts for "willful and malicious injury" under § 523(a)(6), making them nondischargeable in Chapter 7 and, in some circumstances, in business reorganizations. Hampson carefully analyzes the interplay between state court findings, issue preclusion, and the Bankruptcy Code's independent dischargeability standards.
The more recent Oxford Business Law Blog update demonstrates that these issues continue to evolve. Discussing the bankruptcy of Ammon Bundy following a $52 million Idaho defamation judgment, Hampson notes that the bankruptcy court held the judgment (apart from certain fees and costs) nondischargeable as a single "lump sum" based upon the prior state court findings.
What This Means for Consumer Bankruptcy Practice
For consumer bankruptcy attorneys, however, there is an important practical point that deserves emphasis.
Many of these headline-making defamation judgments run into the tens or even hundreds of millions of dollars—amounts that would almost certainly exceed the absurdly inadequate Chapter 13 debt limits currently imposed by Congress. NACBA has continued advocating for Congress to substantially increase those limits so that Chapter 13 remains available to debtors facing modern levels of consumer debt.
But practitioners should not stop the analysis there.
Even if a debtor qualifies for Chapter 13, the discharge analysis is materially different from Chapter 7.
The below comparison chart highlights several critical distinctions between § 523(a)(6) and § 1328(a)(4) that are often overlooked.
Among the most significant differences:
- Section 523(a)(6) applies to debts for willful and malicious injury to a person or property.
- Section 1328(a)(4) instead applies only to debts arising from personal injury or death, requires a prior civil judgment or restitution award, and uses the broader formulation willful or malicious injury.
|
Comparison of Willful and/or Malice Nondischargeability in Chapter 7 and Chapter 13 |
||
|
|
§523(a)(6) |
§1328(a)(4) |
|
To: |
Anentity |
An individual or the Estate of an individual |
|
For: |
Injury to Person or Property |
Personal Injury or Death |
|
By: |
The Debtor |
The Debtor |
|
Intent: |
Willful AND Malicious |
Willful OR Malicious |
|
Adjudication: |
No restriction |
Prior Civil Award for restitution or damages |
Those distinctions can be outcome-determinative.
Many defamation cases involve reputational injury rather than traditional bodily injury. Whether a particular defamation judgment falls within Chapter 13's narrower nondischargeability provision is therefore a considerably more nuanced question than simply assuming that because a debt would be nondischargeable under § 523(a)(6), it necessarily survives a Chapter 13 discharge as well.
The statutory language matters, and practitioners should carefully analyze:
-
the nature of the underlying injury;
-
the specific findings made by the trial court;
-
whether there is a prior civil judgment satisfying § 1328(a)(4);
-
and whether the judgment involves "personal injury or death" within the meaning of Chapter 13.
The First Amendment and the Fresh Start
One of the article's most thought-provoking discussions concerns the tension between bankruptcy's fresh-start policy and the First Amendment.
Hampson observes that if civil liability chills speech, lifetime nondischargeable debt may freeze it altogether. At the same time, he recognizes the equally compelling interests of individuals whose reputations—and often their personal safety—have been devastated by intentionally false statements. He also notes that defamation law can cut both ways, protecting election workers and victims of harassment while also being wielded against those who publicly report abuse.
These competing interests explain why bankruptcy courts must carefully distinguish between constitutional protections for speech and the consequences of intentionally causing legally cognizable harm.
Final Thoughts
Professor Hampson has produced an excellent and timely contribution that bankruptcy practitioners should read.
The increasing overlap between viral media, massive defamation verdicts, and bankruptcy filings ensures these issues will become more common rather than less. Consumer bankruptcy attorneys should be prepared not only to recognize when § 523(a)(6) is implicated, but also to appreciate that Chapter 13 presents a different statutory framework under § 1328(a)(4). Those distinctions may determine whether a debtor receives a true fresh start—or carries a judgment for the remainder of his or her life.
Just as importantly, the article reminds us that bankruptcy is increasingly being asked to reconcile two fundamental American values: robust protection of free expression and meaningful accountability for intentional wrongdoing. That conversation is only beginning.
Blog comments