No Prejudgment Interest for Nondischargeable Debt

The U.S. Court of Appeals for the Tenth Circuit affirmed a bankruptcy court’s finding that although a fraudulently induced loan was not dischargeable in the debtor’s Chapter 7 bankruptcy proceeding, the claimants were not entitled to recover prejudgment interest on their claim (Diamond v. Bakay (In re Bakay), 10th Cir., 11-1373, 12/20/11).

The circuit court noted that under federal law, prejudgment interest is ordinarily awarded absent some justification for not doing so, however, it is not recoverable as a matter of right. The bankruptcy court’s conclusion that the claimants’ failure to pursue their claim for four years ...