Fees From Arbitration Over Ownership of Firm Not Dischargeable in Bankruptcy Proceedings

The attorneys’ fees that a debtor was ordered to pay as part of a nasty arbitration he lost just prior to filing for bankruptcy protection cannot be discharged in his bankruptcy proceedings, the U.S. Court of Appeals for the Fifth Circuit held Feb. 8 (Shcolnik v. Rapid Settlements Ltd. (In re Shcolnik), 5th Cir., No. 10-20800).

Because the debt may be for a willful and malicious injury, it can be excepted from discharge under Section 523(a)(6) of the Bankruptcy Code, Chief Judge Edith H. Jones said for the court.

The debtor was an officer for a company. Although ...