“Alice in Wonderland” in BK Court? Debtor Not Allowed To Waive Discharge…

Bankruptcy is a means by which people and businesses can get a “fresh start” when they cannot otherwise escape their debts.  What they generally seek is “discharge” of their debts.  Not all debts are dischargeable, however.  Moreover, under certain circumstances, a debtor may choose to waive his right to discharge of debt if, for example, there is a dispute in the bankruptcy court as to whether a debt is dischargeable and the costs of going to battle are deemed to be too high.

Today,  in a counter-intuitive case and decision, the United States Bankruptcy Appellate Panel, over a dissent by U.S. Bankruptcy Chief Judge Robert Kressel (D. Minn.), affirmed the bankruptcy court’s rejection of the debtor’s waiver of discharge.

Judge Mahoney, writing for the majority, held, “When a debtor files a waiver of discharge…, the bankruptcy court must assess whether the waiver is an intentional relinquishment of the debtor’s known rights.  In so doing, the court may take the creditors’ interests into consideration.”  The illogic of these two sentences may be the crux of Judge Kressel’s dissent, which basically questioned whether there was any basis in the Bankruptcy Code to support the court’s intervention, of sorts, into the debtor’s right to waiver.