Rodriguez & Doern PLLC Bankruptcy Blog
June 18, 2013
In the case of In Re: Bellafiore, Eastern District of New York, Second Circuit, in May 2013, Bankruptcy Court ruled the debtor could use his homestead exemption on the cash proceeds on the sale of his home prior to the bankruptcy filing. This means the fact that the debtor intended to vacate and sell real property does not change the fact that the real property was his permanent residence and his homestead, and he can exempt the proceeds in the bankruptcy.
On May 13, 2013, the U.S. Supreme Court in Bullock v. BankChampaign established a standard for defalcation in § 523(a)(4). The Court stated, “We hold that defalcation includes a culpable state of mind requirement akin to that which accompanies application of the other terms in the same statutory phrase. We describe that state of mind as one involving knowledge of, or gross recklessness in respect to, the improper nature of the relevant fiduciary behavior.”
This standard now basically requires an intent element in order to prove defalcation in the non-dischargeability of debt in an Adversary Proceeding in Bankruptcy Court.