Opinion
No. 77 B 2854
December 21, 1978
Bankrupts — Debts Not Affected by Discharge — Willful and Malicious Conversion
A bankrupt's use of proceeds of a savings account, which under the terms of his divorce judgment were to be turned over to his children, constituted a willful and malicious conversion of property and his liability therefor was nondischargeable in bankruptcy.
The passbook to the savings account had been pledged as security with a bonding company pending completion of bankrupt's construction project. The divorce judgment had ordered that when the passbook was released, the sum of $2,500 together with any accrued interest be assigned to each of the two children. When the bankrupt failed to assign the money upon release of the passbook, the bankrupt's exwife reduced the obligation to a money judgment in the amount of $6,145. It is this judgment which the bankrupt is attempting to discharge in bankruptcy.
The bankrupt contended that his use of the proceeds for the payment of creditors of the construction project did not constitute a willful and malicious conversion of the property of another within the meaning of Section 17a(2) of the Bankruptcy Act.
The Court found the conversion to be willful and malicious in that the bankrupt knowingly ignored the terms of the divorce judgment by failing to deposit the money to his children's accounts, that this conversion had been done knowingly and intentionally and was against good morals, and that the conversion was wrongful and had caused financial injury to the bankrupt's children. Thus, the Court held that the money judgment was a liability for a tort undischargeable in bankruptcy under Section 17a(2). See Sec. 17a(2) [§ 523(a)(2)] at ¶ 9228.
Bankrupts — Debts Not Affected by Discharge — Maintenance and Support
A bankrupt's obligation under the terms of his divorce judgment to pay the tuition and medical expenses of his children was nondischargeable in bankruptcy under Section 17a(7) as maintenance and support of the bankrupt's children even though the obligation extended beyond the children's minorities. See Sec. 17a(7) [§ 523(a)(5)] at ¶ 9231.