Summary#
H.R. 10724 would amend title 11 of the United States Code, the Bankruptcy Code. It would make the debtor’s own actions explicit in several exceptions that can leave a debt unpaid after bankruptcy; its stated goal is to clarify those rules. The bill is not law, and its passage is uncertain.
- For one fraud-related exception, it specifies that the debtor must have used false pretenses, made a false representation, or committed actual fraud. It keeps out statements about the debtor’s or an insider’s financial condition.
- For another exception involving a written statement about financial condition, it adds that the debtor must have used the statement. The supplied text does not reproduce the rest of that exception.
- It specifies that fraud or defalcation (a failure to properly handle money or property) while acting in a fiduciary capacity, embezzlement, or larceny must be committed by the debtor for this exception to apply.
What it means for you#
- People filing for bankruptcy: If the bill became law, these exceptions would expressly focus on conduct by the debtor. A debt that falls within an exception to discharge may remain owed after bankruptcy.
- Creditors: The bill could affect whether certain debts are excepted from discharge, depending on who used a statement or committed the conduct. The supplied text does not set out a process for deciding individual cases.
- Everyone else: The bill changes bankruptcy rules; it does not create a new service, benefit, fee, or fine.
Money#
No cost information is in the available material.
- The bill does not provide a spending amount or estimate costs for courts, debtors, or creditors.
- It does not specify new staff, fees, or enforcement funding.
What is unclear#
- The current version of title 11 was not supplied, so the precise difference from current law and how much the wording changes existing rules could not be verified.
- The bill does not reproduce the full text of the written-financial-statement exception, so its complete requirements are not clear from the supplied material.
- The text does not explain how the debtor’s role would be judged when another person was also involved.
- The bill does not specify a start date or provide details about how it would apply to ongoing or past bankruptcy cases.
Case for#
- The bill appears intended to make clear that these discharge exceptions concern conduct by the debtor, rather than conduct by someone else.
- A possible argument for the bill is that clearer attribution rules could help debtors and creditors understand when these debts remain owed after bankruptcy.
Case against#
- One concern is that expressly requiring the debtor to have committed or used the conduct could limit an exception where another person carried it out. The bill does not explain how it would treat shared or indirect involvement.
- It is unclear how much practical change the wording would make, because the current law was not supplied and the bill gives little detail about applying the rules to particular cases.