Supreme Court Clarifies When Creditors Can Collect in Bankruptcy (1)

The U.S. Supreme Court clarified when a creditor can be held liable for violating a bankruptcy discharge order, rejecting a federal appeals court’s subjective standard that left few satisfied.

Justice Stephen G. Breyer, writing for a unanimous court, said June 3 that neither a creditor’s strict liability from violating the order nor a purely subjective standard—in which creditors may have a reasonable belief that they can collect on debt—is appropriate in holding creditors liable.

An “objective reasonableness” standard must be used to find a creditor liable for civil contempt sanctions for violating a bankruptcy discharge order when there is no ...