Supreme Court Decision on Defalcation: Bullock v BankChampaign

The United States Supreme Court unanimously resolved the split between the circuits
on the issue of the standard of proof to object to the dischargeability of a debt based on defalcation while acting in a fiduciary capacity pursuant to 11 USC 523(a)(4).  Bullock v BankChampaign, NA, 133 S. Ct 1754, 2013 US Lexis 3521(May 13, 2013).  Defalcation has to do with a fiduciary or trustee breaching his obligations to the beneficiary.  The court held that intentional or gross reckless conduct involving knowledge of the improper nature of the fiduciary obligation is required.  Some courts had not required this state of mind requirement and permitted denial of discharge based on mere negligence or even innocent mistake.  The Supreme Court rejected this view.



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