Court Refuses To Bar Debt From Discharge.

In this adversary action brought by a bank, the bank argued that the debtors’ obligations under a promissory note and an ag security agreement should be excepted from discharge in the Chapter 7 case under 11 U.S.C. Sec. 523(a)(6) due to the debtors’ willful and malicious injury to the property.  The debtors had borrowed $150,000 from the bank to finance their farming operation.  The security agreement required the debtors to make all proceeds from the sale of collateral available immediately to the bank by depositing the proceeds in the debtors’ account with the bank.  The bank did not enforce that policy.  The husband farmer was injured in a farming accident and his relatives took over the farming operation but did not deposit all proceeds from the farming operation into the bank account.  Instead, the majority of funds used to pay medical bills.  The husband’s son started his own farming operation with the use of his father’s equipment, with the son ultimately providing financial assistance to his father.  The debtors filed Chapter 7 and the bank argued that the funds not deposited into the bank account should be excepted from discharge due to willful and malicious injury to the bank.  The court, however, determined that the bank failed to prove willfulness, malice and injury as required by the statute.  The debtors’ testimony was viewed as credible.  In re Jacobsen, No. 13-00331, 2015 Bankr. LEXIS 94 (Mar. 27, 2015).    

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