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Supreme Court votes unanimously in bankruptcy case

 February 25, 2023

The Supreme Court ruled in a unanimous decision Wednesday that a California woman was unable to use bankruptcy to avoid a $200,000 debt from her ex-husband.

Kate Bartenwerfer faces paying the debt despite claiming that she did not know about her husband's misrepresentations about a house that the couple flipped and sold for over $2 million.

The ruling

“Innocent people are sometimes held liable for fraud they did not personally commit, and, if they declare bankruptcy, [the bankruptcy code] bars discharge of that debt,” Barrett wrote.

“So it is for Bartenwerfer, and we are sensitive to the hardship she faces," she added.

The context

"The justices unanimously ruled against Kate Bartenwerfer," the Wall Street Journal reported.

For her part, Ms Bartenwerfer "argued her debt stemming from a roughly $200,000 fraud judgment should be erased through her personal bankruptcy filing because a house-flipping project that was later determined to be fraudulent, was handled by her husband, and she was a bystander."

The details

"Kate and David Bartenwerfer, who were business partners in addition to being married, bought the house in 2005 with the intention of flipping it. David Bartenwerfer took charge of the project, while Kate was largely uninvolved," according to Reuters. They sold the property to Kieran Buckley who later filed a lawsuit against the couple over undisclosed known defects of the home

"After a California state court jury awarded [Buckley] $200,000, the couple filed for Chapter 7 bankruptcy and sought to discharge the debt," it added.

David Bartenwerfer was later blocked from doing so after a judge ruled that he concealed the house’s defects. Ms. Bartenwerfer was also determined to be liable for the debt.

Ultimately failing to secure a favorable ruling with the 9th U.S. Circuit Court of Appeals, Ms. Bartenwerfer’s appeal case was then elevated to the Supreme Court.

The Supreme Court’s decision included both personal and business details that led to the ruling that was unanimously agreed upon by all nine of the court's justices.

“‘Because [Bartenwerfer] does not dispute that she and her husband acted as partners, the debt is not dischargeable under’ the statute at issue in the case,” Justice Sotomayor said in a concurring opinion.

The decision ends the longtime case in the home purchase extending back to 2005.

In a time of high division among the justices in the nation's highest court, in this case, at least, they are united.