Schorr Law’s Los Angeles based litigation practice recently obtained a successful fraud judgment for one of our clients. Parties who secure successful judgments may find, to their frustration, that the losing party has filed bankruptcy as a way to escape the judgment of the court. Yet, debtors who are found liable for non-dischargeable debts, such as fraud, cannot simply escape their judgments by filing for bankruptcy. 11 U.S.C. § 523 provides for many types of debts that cannot be discharged in bankruptcy. Under 11 U.S.C. § 523 (a)(2)(A), debts for money, goods or services acquired through acts of fraud, false pretenses or misrepresentation are not dischargeable in bankruptcy. Still, creditors must file a timely complaint with the bankruptcy court to ensure that debts resulting from fraud judgments are not discharged. Most United States Bankruptcy Courts require a filing no later than 60 days after the first date set for the meeting of creditors.
Creditors who have obtained a judgment for a non-dischargeable debt, such as fraud, will nevertheless wish to avoid the prospect of re-litigating the issue in bankruptcy court. These creditors will be relieved to know that, under California law, the doctrine of Collateral Estoppel allows a bankruptcy court to give preclusive effect to a state judgment. The bankruptcy court is required to apply Collateral Estoppel where the issues are identical, the party being estopped was a party in the prior adjudication and there was a final judgment on the issue. In re Bugna (9th Cir. 1994) 33 F3d 1054, 1057. Similarly, the bankruptcy court generally must treat default judgments with preclusive effect when the defendant had actual notice of the litigation, the opportunity to participate, the issue was “actually litigated” and ultimately decided in the previous litigation. In re Harmon (9th Cir. 2001) 250 F3d 1240, 1246–1249. Accordingly, creditors who correctly apply Collateral Estoppel will avoid wasting time re-litigating matters in bankruptcy court that have already been decided by a state court.
Schorr Law can help clients successfully obtain and secure judgments. Our attorneys understand the complexities of the litigation process and possess the high level of experience necessary to address any issue that may arise in litigation. As a result, Schorr Law has gained a reputation for obtaining positive results for our clients.
For more information or help with your dispute, contact Schorr Law, APC, www.schorr-law.com, 310-954-1877, info@schorr-law.com