Justices Say Bankruptcy Can’t Erase Debt From Others’ Fraud (1)

The US Supreme Court ruled that a bankrupt California woman can’t wipe out debts incurred through her husband’s fraudulent conduct in a home sale.

Kate Bartenwerfer had argued that she was unaware of her husband’s actions. But she can’t use bankruptcy to discharge the debt obtained by fraud, the high court said in a unanimous decision Wednesday.

The bankruptcy code generally allows debtors to discharge pre-bankruptcy liabilities, but there’s an exception for situations in which the debt was incurred through fraud. Because the code turns on how the money was obtained, and not who committed the fraud, the exception extends ...