Essay by Lawrence Ponoroff
Although the principle of “fresh start” in bankruptcy is a relatively recent development in historical terms, today, nobody seriously questions an “honest-but-unfortunate” debtor's entitlement to a discharge in bankruptcy. There is, however, considerable disagreement over the meaning of that phrase and when circumstances warrant denial discharge as to a particular debt. In this Essay, Professor Ponoroff suggests that this uncertainty is symptomatic of a more fundamental tension between state-law rights and bankruptcy policy. Accordingly, he uses the issue of imputed liability for fraudulently incurred debts as a vehicle for attempting to strike a reasoned balance between state-law entitlements and bankruptcy values. In particular, he argues that, in large measure, the statutory discharge exceptions are not exclusively about fresh start; they also reflect competing social policy choices based on the character of the debt, not the moral innocence of the debtor. Therefore, he concludes that there are sound reasons to recognize the agency principle of vicarious liability for business debts in bankruptcy dischargeability litigation, and he demonstrates why, in so doing, courts neither compromise the aims of the fresh start policy nor promote inequity in cases involving imputed liability for obligations arising out of nonbusiness relationships.
About the Author
Lawrence Ponoroff. Professor of Law, Tulane Law School.
Citation
70 Tul. L. Rev. 2515 (1996)