Bankruptcy Court Awards Creditor Money Judgment

February 5th, 2009 by Reed Allmand

In the case of Morrison v. Western Builders of Ama­rillo Inc. in the 5th U.S. Circuit Court of Appeals, Chief Judge Edith H. Jones ruled that bank­ruptcy courts have the power to award money judgments against debtors who have nondischargeable debt.

In this case the bankruptcy court ruled that a bankruptcy filer’s debt was not dischargeable in bankruptcy; but his ruling didn’t stop there. The judge entered a money judgment against the debtor on behalf of the creditor.

The judge stated:

“It is not unreasonable to conclude that Congress, which intended bankruptcy courts to exercise far more expansive jurisdiction under the Code than under previous law, could not have intended to cut back on their ability to enter money judgments in the core proceedings encompassed by non­dischargeability complaints,” said Judge Jones.

Basically, the judge ruled that a creditor should not need to secure a judgment against a debtor in a separate court proceeding if the debt is found to not be dischargeable by the bankruptcy court. The judge believes that it is within the power of the bankruptcy court to institute judgments against debtors in the name of judicial efficiency.

This debtor attempted to file bankruptcy on nondischargeable debt and ended up with a judgment against him. This is why it is so important to work with a professional bankruptcy attorney when considering bankruptcy. A professional bankruptcy attorney can look at a debtor’s liabilities and determine if they are likely to be discharged or not before you go into to a bankruptcy court.