Trustee Wins Supreme Court Fight Over Debt Relief Bar

Law360, Los Angeles (May 14, 2013, 6:50 PM EDT) -- The U.S. Supreme Court on Monday sided with a trustee who unwittingly misused his trust's funds, ruling that the legal term of “defalcation” means that gross negligence or knowledge of wrongdoing must be shown to block him from getting a bankruptcy court to discharge his debt.

In a unanimous decision written by Justice Stephen G. Breyer, the court explored the history and uncertainty surrounding the term “defalcation,” noting that Congress added it to an 1867 bankruptcy statute and that “legal authorities have disagreed about its meaning...
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