When Bankruptcy and Family Issues Collide

When an abused child won a nearly $4 million award from her mother in 2007 for the mother's part in failing to protect her from sexual abuse by the stepfather, it would have seemed that all that was left to do was collect. Now, however, the mother, Irene S. Chaffee, has filed for Chapter 7 bankruptcy relief, and she is seeking to have the debt to her daughter discharged. The question now is, “Can this debt be erased?”

A Mother's Complicity

When Sara Chaffee was a young child, her stepfather sexually abused her. Her mother reported the abuse to the authorities and the stepfather was sent to prison. Three years after he was released, however, he moved back in to the family home. In 2000, when Sara was 16 years old, the sexual abuse began anew. This time, the stepfather was convicted of three counts of rape and one count of endangering the welfare of a child, and he was sent to prison once more. While these criminal proceedings were going on, Sara's mother, Irene Chaffee, pleaded guilty to the misdemeanor crime of child endangerment under New York Penal Law ' 260.10.

Based on the injuries she had suffered because of her mother's failure to protect her from her stepfather, Sara Chaffee sued her mother and won a civil award of $3,772,950. When the mother filed for bankruptcy protection in June 2007, she listed the judgment lien of $3,772,950 on schedule D (Creditors Holding Secured Claims).

A Motion for Summary Judgment

In Chaffee v. Chaffee, 07-90171, Sara Chaffee moved for summary judgment. She asked Northern District Bankruptcy Judge Robert E. Littlefield Jr. to determine that the judgment lien was not dischargeable in a Chapter 7 bankruptcy proceeding because 11 U.S.C. ' 523(a)(6) precludes discharge in bankruptcy of civil damages awarded to compensate for willful and malicious conduct. The court, however, denied the motion.

The plaintiff had relied entirely on the doctrine of collateral estoppel in her motion, arguing that her mother's conviction and subsequent loss in the civil suit established conclusively that prior judgments had found her guilty of a “willful and malicious” tort. But Judge Littlefield determined this was too great a leap, at least on a motion for summary judgment. The records from both the criminal and civil proceedings were cursory. There was, for example, no indication in the civil action records that the issue of the mother's mental state at the time of the tort had been litigated. And convictions under subdivision ' 260.10 of the Penal Code require only a finding that a defendant knowingly took part in conduct that was “likely” to injure the welfare of a child ' no actual injury need ever take place. So, absent further inquiry, the court was not prepared to state that Sara's mother had “willfully” or “maliciously” done the things that led to her conviction. Wrote Judge Littlefield, “Based on the record and any reasonable inferences derived therefrom, the state court could have based it award on a finding of a lower mental state ' such as negligence or recklessness.”

Conclusion

As Chaffee noted, “The statutory policy in favor of giving debtors a 'fresh start' by freeing them of liability thus has come to collide with the equities of this case. Seldom is the bankruptcy court called upon to protect the rights of children. This is one of those rare cases.” But the court could not protect those rights without more information.

Judge Littlefield's ruling does not preclude Sara Chaffee from fighting the discharge of her mother's debt to her through bankruptcy. But she will have to prove, through further litigation, that her mother's tortuous actions toward her were willful and malicious. In calling for the scheduling of a pretrail conference on the matter, the court concluded, “The decision today in no way prevents plaintiff from potentially prevailing after a plenary trial on the merits.”

Janice G. Inman is Editor-in-Chief of this newsletter.

When an abused child won a nearly $4 million award from her mother in 2007 for the mother's part in failing to protect her from sexual abuse by the stepfather, it would have seemed that all that was left to do was collect. Now, however, the mother, Irene S. Chaffee, has filed for Chapter 7 bankruptcy relief, and she is seeking to have the debt to her daughter discharged. The question now is, “Can this debt be erased?”

A Mother's Complicity

When Sara Chaffee was a young child, her stepfather sexually abused her. Her mother reported the abuse to the authorities and the stepfather was sent to prison. Three years after he was released, however, he moved back in to the family home. In 2000, when Sara was 16 years old, the sexual abuse began anew. This time, the stepfather was convicted of three counts of rape and one count of endangering the welfare of a child, and he was sent to prison once more. While these criminal proceedings were going on, Sara's mother, Irene Chaffee, pleaded guilty to the misdemeanor crime of child endangerment under New York Penal Law ' 260.10.

Based on the injuries she had suffered because of her mother's failure to protect her from her stepfather, Sara Chaffee sued her mother and won a civil award of $3,772,950. When the mother filed for bankruptcy protection in June 2007, she listed the judgment lien of $3,772,950 on schedule D (Creditors Holding Secured Claims).

A Motion for Summary Judgment

In Chaffee v. Chaffee, 07-90171, Sara Chaffee moved for summary judgment. She asked Northern District Bankruptcy Judge Robert E. Littlefield Jr. to determine that the judgment lien was not dischargeable in a Chapter 7 bankruptcy proceeding because 11 U.S.C. ' 523(a)(6) precludes discharge in bankruptcy of civil damages awarded to compensate for willful and malicious conduct. The court, however, denied the motion.

The plaintiff had relied entirely on the doctrine of collateral estoppel in her motion, arguing that her mother's conviction and subsequent loss in the civil suit established conclusively that prior judgments had found her guilty of a “willful and malicious” tort. But Judge Littlefield determined this was too great a leap, at least on a motion for summary judgment. The records from both the criminal and civil proceedings were cursory. There was, for example, no indication in the civil action records that the issue of the mother's mental state at the time of the tort had been litigated. And convictions under subdivision ' 260.10 of the Penal Code require only a finding that a defendant knowingly took part in conduct that was “likely” to injure the welfare of a child ' no actual injury need ever take place. So, absent further inquiry, the court was not prepared to state that Sara's mother had “willfully” or “maliciously” done the things that led to her conviction. Wrote Judge Littlefield, “Based on the record and any reasonable inferences derived therefrom, the state court could have based it award on a finding of a lower mental state ' such as negligence or recklessness.”

Conclusion

As Chaffee noted, “The statutory policy in favor of giving debtors a 'fresh start' by freeing them of liability thus has come to collide with the equities of this case. Seldom is the bankruptcy court called upon to protect the rights of children. This is one of those rare cases.” But the court could not protect those rights without more information.

Judge Littlefield's ruling does not preclude Sara Chaffee from fighting the discharge of her mother's debt to her through bankruptcy. But she will have to prove, through further litigation, that her mother's tortuous actions toward her were willful and malicious. In calling for the scheduling of a pretrail conference on the matter, the court concluded, “The decision today in no way prevents plaintiff from potentially prevailing after a plenary trial on the merits.”

Janice G. Inman is Editor-in-Chief of this newsletter.