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Supreme Court Ruling on Dischargeability of Debts Incurred by Fraud

June 1, 2016

In a 7-1 decision, with Justice Thomas dissenting, the United States Supreme Court reversed In re Ritz, 787 F.3d 312 (5th Cir., May 22, 2015) and resoled a circuit split, with its decision in Husky International Electronics, Inc. v. Ritz, 2016 WL 2842452 (May 16, 2016). The Supreme Court held that the term "actual fraud" in 11 U.S.C. § 523(a)(2)(A) encompasses forms of fraud, like fraudulent conveyance schemes, that can be effected without a false representation. The Court said that anything that counts as "fraud" and is done with wrongful intent is "actual fraud," although "the term is difficult to define more precisely."

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