The opinion
Dated: September 15, 2026
The following is ORDERED:
Gl K—HSh ego
PAUL R. THOMAS
UNITED STATES BANKRUPTCY JUDGE
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF OKLAHOMA
IN RE:
DEBORAH JEAN DEIBERT, Case No. 24-10239-T
Chapter 7
Debtor.
CLINTON VEIT AND BARBETTE VEIT,
Plaintiffs,
Adv. No. 24-01012-T
DEBORAH JEAN DEIBERT,
Defendant.
MEMORANDUM OPINION
This case arises out of a dispute between neighbors over the construction of a two-story
garage structure. Amid contentious litigation in state court regarding compliance with
neighborhood plat restrictions, the party responsible for erecting the structure, the defendant in the
state court litigation, filed a petition for bankruptcy under chapter 7 of the United States
Bankruptcy Code. The plaintiffs in the state court litigation cried foul and commenced this
adversary proceeding seeking to deny the debtor a discharge under 11 U.S.C. § 727(a)(2)(A) and
727(a)(4),1 and objecting to the discharge of their debt under § 523(a)(6). The following “Findings
of Fact” and “Conclusions of Law” are made pursuant to Federal Rule of Civil Procedure 52,
which is made applicable to this adversary proceeding pursuant to Federal Rule of Bankruptcy
Procedure 7052.
Jurisdiction
The Court has jurisdiction over this bankruptcy case pursuant to 28 U.S.C. § 1334(b).
Venue is proper pursuant to 28 U.S.C. § 1409. Reference to the Court of the bankruptcy case is
proper pursuant to 28 U.S.C. § 157(a). Matters related to the denial of a discharge and
dischargeability of a particular debt are core proceedings as defined by 28 U.S.C. § 157(b)(2)(I)
and (J).
Findings of Fact
Deborah Jean Deibert (“Defendant”) purchased a home in the Wilson View Second
Addition to the City of Tulsa, Oklahoma (“Defendant’s Property”) in 2020. The deed to
Defendant’s Property describes it as:
Lot Five (5), Block One (1), Wilson View Second Addition to the City of Tulsa,
Tulsa County, State of Oklahoma, according to the recorded Plat thereof.2
Despite the reference to a “Plat” in the deed, Defendant testified that she was unaware of any plat,
restrictions, or other covenants related to Defendant’s Property at the time she purchased it.
1 Unless otherwise noted, all statutory references are to sections of the United States
Bankruptcy Code, 11 U.S.C. § 101 et seq.
2 Plaintiffs’ Ex. 3.
The Structure
Clinton and Barbette Veit (“Plaintiffs” or the “Veits”) are neighbors that own property
adjoining Defendant’s Property. In 2021, after observing multiple homes in her neighborhood with
additional outbuildings, Defendant made the decision to construct a detached garage with a second
story guest room in her backyard (the “Structure”). While the project was still in the conceptual
phase, Defendant discussed her plans with Mr. Veit and received no negative feedback.
In spring of 2022, Defendant contacted a designer to draw up sketches and plans for the
Structure. In May 2022, Defendant applied for a Special Exception to the City of Tulsa Zoning
Code to build the Structure, referred to as an Accessory Dwelling Unit, on her property. Notice
of a meeting on the application with the City of Tulsa Board of Adjustment (the “BOA”), together
with copies of the design plans, were sent to all affected neighbors in the Wilson View Second
Addition, including Plaintiffs. Prior to the BOA meeting, Defendant became aware that Plaintiffs
had concerns about the Structure. Defendant met with Plaintiffs and listened to their concerns.
She asked her designer to revise the plans to address several of Plaintiffs’ concerns, such as moving
the Structure further from the fence line of Plaintiffs’ property, using opaque glass in windows
facing Plaintiffs’ property, and reducing the size of the second story. Defendant provided the
revised plans to Plaintiffs and offered to arrange a meeting with her designer if they desired.
Plaintiffs declined the offer and expressed no dissatisfaction with the new design. When asked if
Plaintiffs were happy with Defendant’s revised plans for the Structure, Mrs. Veit answered “Sure.”
In June 2022, the BOA held a meeting regarding Defendant’s application. Several of
Defendant’s neighbors spoke at the meeting in opposition to the application. Although Plaintiffs
attended the BOA meeting, they did not speak or otherwise register their opposition to the
application or dissatisfaction with the project. At the conclusion of the meeting, the BOA
unanimously approved Defendant’s application.
After receiving the required permits, construction on the Structure began in October 2022.
Defendant hired Charles Rick (“Mr. Rick”) as her general contractor for the project. Construction
continued apace until November 28, 2022. On that date, Defendant received a letter (the “Hollaway
Letter”) from attorney Blair Hollaway (“Mr. Hollaway”) of Blair Law.3 The Hollaway Letter
declared that the Structure violated recorded restrictions governing Wilson View Second Addition,
but did not otherwise reference a specific plat or give any details regarding the alleged violation.
Nor did it identify Mr. Hollaway’s clients. The Hollaway Letter made demand that Defendant
take steps to remove the Structure within 10 days or Mr. Hollaway would initiate legal proceedings
and seek monetary damages.
Defendant immediately engaged counsel, who located a 1940 deed of dedication for the
Wilson View Second Addition (the “Plat”), which contained various restrictions and covenants.4
Her counsel timely responded to the Hollaway Letter, indicating their belief that the Structure was
not in violation of the Plat. Defendant also contacted Mr. Rick and asked him to 1) strictly adhere
to the specifications approved by the BOA; and 2) make the Structure his priority in order to finish
the project as quickly as possible and prevent further disruption to her neighbors.
The State Court Litigation
On December 12, 2022, Plaintiffs, represented by Mr. Hollaway, filed a nuisance complaint
and an action to enforce restrictive covenants against Defendant in the District Court of Tulsa
County, Oklahoma (the “State Court”), Case No. CJ-2022-3750 (the “State Court Litigation”).5
3 ECF No. 30-1, at 24.
4 Plaintiffs’ Ex. 2.
5 ECF No. 30, at 8 ¶ 21.
On January 19, 2023, the State Court entered an ex parte temporary restraining order (“TRO”).6
The TRO enjoined Defendant and her agents from “performing any further construction on” the
Structure, including “the installation of any electrical or plumbing fixtures or materials in or on”
the Structure, and from “allowing any person . . . to occupy” the Structure.7 Upon learning of the
TRO, Defendant contacted her counsel and immediately asked Mr. Rick to inform his crew to stop
all work on the Structure. Notwithstanding the language of the TRO, Defendant allowed Mr. Rick
to take steps to secure the lot and the Structure, by filling in an open trench, adding a seal to the
previously installed garage door so that it could be closed, and making necessary repairs to an
existing entryway door that would allow it to be locked. Mr. Rick testified to the necessity of these
actions to secure materials and tools being stored inside the Structure, as well as to leave the
exterior of the worksite in a safe condition.
On the day the TRO was received by Defendant, Mr. Rick’s crew was in the middle of
connecting electrical service to the Structure. Without Defendant’s or Mr. Rick’s knowledge or
authorization, a member of Mr. Rick’s crew returned to the job site and installed a meter box and
power head to complete the electrical work. In addition, when the TRO was issued and
construction on the Structure halted, electricity was being provided to Defendant’s home by way
of temporary electrical posts. Mr. Rick informed Defendant that the temporary connections were
unsafe and posed a danger to her health and safety. Defendant made application to the State Court
to amend the TRO to allow her to replace the temporary connections with a permanent electrical
attachment to her home (the “First Application”).8
6 Defendant’s Ex. 117.
7 Id. at 2.
8 Defendant’s Ex. 119.
On July 3, 2023, the State Court entered a temporary injunction (the “Temporary
Injunction”).9 The Temporary Injunction enjoined Defendant or her agents from “performing any
further construction” on the Structure, and from “allowing any person to occupy” the Structure.
The presiding State Court judge added handwritten language to the Temporary Injunction, granting
the First Application, and allowing Defendant “to perform permanent electrical re-connection to
her home.”10 Upon receipt of the Temporary Injunction, Mr. Rick took steps to install an electrical
box to replace the temporary connections and run permanent connections to Defendant’s home.
On July 7, 2023, Defendant filed a second application to amend the TRO (the “Second
Application”). For reasons that are unknown, a document containing a file stamp of the State Court
clerk and a stamp indicating the signature of the presiding State Court judge was filed in the State
Court on August 10, 2023 (the “Erroneous Order”).11 Nothing on the face of the Erroneous Order
suggests that it was not a legitimate order of the State Court filed in the State Court Litigation. The
Erroneous Order purported to grant the Second Application. It also went further and allowed
Defendant to complete construction on the downstairs portion of the Structure. The Erroneous
Order also stated that Defendant “shall not have permission to conduct construction to benefit the
second story dwelling area.” Defendant found out about the Erroneous Order on September 6,
2023.12 She was not aware at that time that it was anything other than a valid order of the State
Court. Relying on the apparent authority granted in the Erroneous Order, Defendant contacted Mr.
9 ECF No. 25-2 (attachment to Amended Complaint); ECF No. 30-1, at 43 (attachment to
Declaration of Deborah Deibert in Support of Motion for Summary Judgment). The Temporary
Injunction was discussed at the Trial, but not offered as an exhibit by any party. It was attached to
pleadings filed by both parties at various points in the litigation of this matter. Therefore, the Court
will take judicial notice of its contents.
10 ECF No. 25-2, at 2.
11 Defendant’s Ex. 122.
12 Plaintiffs’ Ex. 27, at 11.
Rick and informed him that work could resume on the downstairs garage portion of the Structure.
Soon after, Mr. Rick and his crew arrived and began to perform additional work on the Structure,
being careful to limit their work to the lower level of the Structure. On or about October 10, 2023,
Defendant was informed that the Erroneous Order had been entered in error and had not been
sanctioned by the State Court judge. Defendant immediately instructed Mr. Rick to cease all work
on the Structure, which he did.
On December 27, 2023, upon further application of Defendant, the State Court issued an
Order of Modification of the Temporary Injunction (the “Modification Order”).13 The
Modification Order states, in part:
The court has already determined on July 3, 2023 the temporary injunction shall
allow the Defendant to install a new meter can on rear of new building and connect
power from utility pole in easement, connect to main house via underground
conduit to the service panel in the garage. Upon Defendant’s affidavit filed August
10, 2023 the court further orders the temporary injunction shall be modified “to
allow Defendant to complete construction of the single car garage/storage portion
of the Structure upon Defendant’s property. Defendant shall not have permission
to conduct construction to benefit the second story dwelling area.”14
After receipt of the Modification Order, Defendant instructed Mr. Rick to complete work on the
lower level of the Structure, with strict instructions to refrain from any work that would “benefit”
the second story.
Plaintiffs allege that after the entry of the TRO and Temporary Injunction, Defendant or
her agents continued to perform work that benefited the second story of the Structure. Both
Plaintiffs testified generally that they saw and heard activity in the Structure, including movement
of people and materials, during times when they believed the State Court had enjoined further
construction. Both Plaintiffs acknowledged that the windows facing their property were covered
13 Defendant’s Ex. 126.
14 Id.
or contained opaque glass, and they could not actually see any work or activity taking place. They
were unable to provide any specifics regarding when the alleged activity took place, or where
exactly within the Defendant’s Property the activity was taking place. The Court found Plaintiffs’
testimony regarding such activity to be heavy on emotion, but light on detail. Defendant credibly
testified that her home includes an attached garage that her domestic partner used for unrelated
woodworking projects during this period. Those projects could easily explain some of the
“construction noises” Plaintiffs claim to have heard during periods when construction on the
Structure had been enjoined. Likewise, once construction was allowed to resume on the lower level
of the Structure, the observation of personnel and materials on Defendant’s Property would be
expected.
Plaintiffs allege that sometime after the TRO was issued, two pipes were installed that
protruded through the floor of the second story of the Structure by approximately 24 inches. They
allege that this constitutes an egregious violation of the State Court orders which specifically
restricted all construction that would “benefit” the second story. Mr. Rick testified regarding the
installation of the pipes. He stated that normally, plumbing was installed “from the top down” to
ensure the pipes and drains are properly aligned. When Mr. Rick’s contractors were installing
plumbing to finish the lower level of the Structure, they were careful to ensure that the drains and
pipes lined up with the previously drilled holes in the floor of the upper story. While they took no
actions to “benefit” the upper level or to install any plumbing fixtures, they placed empty pipes in
the existing holes as placeholders to ensure the lower level plumbing was properly installed.
The Financing
Defendant is an educator at a local community college. She lives with a domestic partner
who contributes to Defendant’s household expenses. Mr. Rick charged Defendant a total of
$75,380 in construction costs related to the Structure. Defendant financed the Structure through
her savings and several loans. In November 2021, Defendant received $98,026.46 by refinancing
her existing home mortgage. In August 2022, she took an unsecured loan of $40,000.00 from
USAA. These funds were used as follows: $38,135 to renovate the existing garage and install a
fence on Defendant’s Property; $1,960 to pay the designer of the Structure; $733 for permits
related to the Structure; and $61,865 to pay Mr. Rick for construction of the Structure. Each of
these expenses were incurred prior to Defendant’s receipt of the Hollaway Letter.
After the initiation of the State Court Litigation, Defendant made early withdrawals totaling
$37,000 from an IRA, which generated $3,671.45 in adviser fees and $15,228 in taxes and
penalties to the IRS. The IRA funds were primarily used to pay her attorney’s fees related to the
State Court Litigation. She also borrowed $19,356 from her 403(b) Plan, and later borrowed
$40,000 from American Express. These funds were used to pay attorney’s fees and living
expenses.
In total, Defendant paid $57,886.87 in litigation-related attorney’s fees for defense of the
State Court Litigation, $39,156.63 of which was paid within one year of filing her underlying
bankruptcy case, and $5,401.50 of which remained unpaid. In addition, Defendant paid Mr. Rick
and other contractors $20,272.74 for construction of the Structure within one year of filing this
bankruptcy case.
The Bankruptcy Case
Beginning around October 2023, Defendant began struggling to keep up with the mounting
legal bills related to the State Court Litigation. She testified that her counsel in the State Court
Litigation informed her of her rights and options regarding seeking a discharge in bankruptcy, but
she did not consider that to be an acceptable path forward. At the time, she believed she would be
able to cover the continuing legal bills and repayment of her remaining debts from her salary.
After attending a mediation with Plaintiffs in January 2024 and learning of the magnitude of
Plaintiffs’ contingent claims for attorney’s fees, Defendant came to the realization that settlement
would be impossible and filing bankruptcy must be considered.
On March 11, 2024 (the “Petition Date”), Defendant filed her voluntary bankruptcy
petition under chapter 7, Case No. 24-10239-T, with the assistance of counsel. In response to a
question on the petition regarding the nature of her debts, Defendant indicated that her debts are
not primarily consumer debts, but they are primarily business debts.15 Among her unsecured debts,
Defendant listed two debts to American Express: 1) for $39,013.05, described as “loan for legal
expenses as a result of pending litigation;” and 2) for $14,746.38, described as “used card to pay
legal expenses as a result of pending litigation.”16 In addition to listing Plaintiffs as unsecured
creditors, Defendant listed each of her neighbors in the Wilson View Second Addition that may
have had a contingent claim regarding the alleged Plat violations, with a notation that she disputes
such claims. Both Plaintiffs and Defendant have characterized the debt to Plaintiffs as a contingent
claim for damages and for attorney’s fees under title 60, section 856 of the Oklahoma Statutes,
which allows a prevailing party in any action to enforce a property restriction or covenant to
recover reasonable attorney’s fees.17
In response to an inquiry from the United States Trustee regarding the characterization of
her debts as primarily non-consumer in nature, Defendant compiled a table listing each of her
scheduled debts, including: the name of the creditor, the location of the debt in her schedules, the
15 Case No. 24-10239, ECF No. 1, at 6; Fed. Rule Bankr. Proc. Official Form 101, Question
16.
16 Case No. 24-10239, ECF No. 1, at 24 ¶¶ 4.2 & 4.3.
17 Amended Complaint, ECF No. 25, at 2-3 ¶ 9.
amount of the debt (with estimates provided if a debt had been scheduled with an “unknown”
value), characterization of the debt as consumer or non-consumer, and an explanation of that
characterization (the “Debt Analysis”).18 The Debt Analysis indicates Defendant has consumer
debts of $318,707, which includes the mortgage on her home, a loan from a 403(b) account for
remodeling, unsecured debts to Capital One and Chase for living expenses, and an unsecured debt
to USAA for remodeling. The Debt Analysis indicates Defendant has non-consumer debts of
$590,859, which includes tax debt, debt to American Express for litigation costs, debt for damages
to Plaintiffs in the State Court Litigation and other potential claimants for Plat violations, and
claims for attorney’s fees related to the State Court Litigation. Plaintiffs did not provide any
independent analysis regarding the characterization of Defendant’s debt.
On June 10, 2024, Plaintiffs filed the instant adversary proceeding. The original Complaint
sought denial of Defendant’s discharge pursuant to § 727(a)(2) and an objection to Defendant’s
discharge of Plaintiffs’ debt pursuant to § 523(a)(6). On December 9, 2024, Plaintiffs filed an
Amended Complaint. The Amended Complaint added claims under § 727(a)(3) and (a)(4), and
substantially amended the claim under § 523(a)(6).19 Plaintiffs have since stated they are no longer
pursuing a claim under § 727(a)(3). The claim under § 523(a)(6) in the Amended Complaint
specifically refers to Defendant’s actions in relation to an injunction issued by the State Court.20
On May 30, 2025, this Court issued a bench ruling related to an emergency motion filed by
Plaintiffs to extend discovery and cross motions for summary judgment filed by each party. In
denying both parties summary judgment on the § 523(a)(6) claim, the Court described it as follows:
18 Defendant’s Ex. 128.
19 ECF No. 25, at 8-9.
20 Id. at 8 ¶ 40 (“Defendant intentionally violated the injunction set by Tulsa County
District Court to protect the Veits’ legal rights.”); ¶ 41 (“Defendant intentionally and maliciously
violated the rights Veits’ legal rights.” [sic]).
“The crux of plaintiffs’ claim under 523(a)(6) is that defendant intentionally and maliciously
violated the temporary injunction entered by the state court prior to the petition date.”21 In
preparation for the trial in this matter, the parties drafted a jointly prepared pre-trial order (the
“Amended Joint Pre-Trial Order”).22 That Order indicates that, among other things, “Plaintiffs
bring their Complaint: . . . for a determination their debt is nondischargeable under 11 U.S.C.
§ 523(a)(6) for willful and malicious injuries due to Defendant violating a temporary restraining
order and/or a temporary injunction[.]”23
On July 27, 2026, a trial was held in this proceeding (the “Trial”). The Court received
evidence and heard testimony from both of the Plaintiffs, Defendant, Mr. Rick, and a court reporter
regarding a discrepancy in a state court transcript.24 At the conclusion of the Trial, the Court took
the matter under advisement.
To the extent the “Conclusions of Law” contain items that should more appropriately be
considered “Findings of Fact,” they are incorporated herein by this reference.
Burden of Proof
The burden of proof in a case under § 523 or § 727 is always upon the objecting party.25
In order to prevail, plaintiffs must prove each statutory element by a preponderance of the
evidence.26 Once the plaintiff has met its burden of presenting prima facie evidence going to each
of the elements of its case, the burden shifts to the debtor to provide a cogent explanation for its
21 ECF No. 68, Transcript of proceedings held on May 30, 2025, at 10.
22 ECF No. 74.
23 Id. at 1 ¶ 4 (emphasis added).
24 The Court found the testimony surrounding the transcript discrepancy to be a tempest in
a teapot. Plaintiffs were apparently trying to establish a fact by “admission” that Defendant has
already openly admitted, which is that after receipt of the TRO, she allowed Mr. Rick to secure
the worksite surrounding the Structure.
25 Fed. R. Bankr. P. 4005.
26 Gullickson v. Brown (In re Brown), 108 F.3d 1290, 1294 (10th Cir. 1997).
actions.27 In order to further the policy of providing a debtor with a “fresh start,” “the Bankruptcy
Code must be construed liberally in favor of the debtor and strictly against the creditor.”28 Denial
of discharge is a harsh remedy to be reserved for a truly pernicious debtor.29 Even so, “a discharge
in bankruptcy is a privilege, not a right, and should only inure to the benefit of the honest debtor.”30
Conclusions of Law
In this adversary proceeding, Plaintiffs are seeking:
1. denial of Defendant’s discharge under § 727(a)(2)(A) for transferring non-exempt assets to
exempt assets with the actual intent to hinder, delay or defraud the Plaintiffs;
2. denial of Defendant’s discharge under § 727(a)(4)(A) for making a false oath in her
bankruptcy petition that her debts were not primarily consumer in nature; and
3. a determination that Plaintiffs’ debt is nondischargeable under § 523(a)(6) for willful and
malicious injuries caused by Defendant’s violation of the TRO and/or Temporary
Injunction.31
The Court will address each in turn.
Section 727(a)(2)(A)
Section 727(a)(2)(A) of the Code provides that a discharge may be denied where
the debtor, with intent to hinder, delay, or defraud a creditor . . . has transferred,
removed, destroyed, mutilated, or concealed, or has permitted to be transferred,
removed, destroyed, mutilated, or concealed—
(A) property of the debtor, within one year before the date of the filing of the
petition[.]
27 McVay v. Phouminh (In re Phouminh), 339 B.R. 231, 242 (Bankr. D. Colo. 2005).
28 In re Brown, 108 F.3d at 1292.
29 Sierra Chemicals, LLC v. Mosley (In re Mosley), 501 B.R. 736 (Bankr. D.N.M. 2013).
30 In re Juzwiak, 89 F.3d 424, 427 (7th Cir. 1996).
31 ECF No. 74 (Amended Joint Pre-Trial Order), at 1-2.
This exception to discharge consists of two critical pieces: 1) an act, i.e, a transfer or a
concealment, involving property of the debtor; and 2) a subjective intent to hinder, delay, or
defraud a creditor.32 Both the act and the intent must be present during the year before the petition
date. “Anything occurring before that one-year period is forgiven.”33
A party objecting under this section must show by a preponderance of the evidence that (1)
the debtor transferred, removed, concealed, destroyed, or mutilated, (2) property of the debtor or
estate, (3) within one year prior to the bankruptcy filing, (4) with the intent to hinder, delay, or
defraud a creditor.34 A majority of courts treat the phrase “hinder, delay or defraud” in the
disjunctive, meaning any of the three may qualify under the statute.35 When determining whether
a transfer was made with the intent to hinder, delay, or defraud creditors, courts must look for
“actual intent to defraud creditors.”36 It is not enough to show that a transfer resulted in harm to
creditors; under § 727(a)(2)(A), a creditor must show that a debtor possessed an unlawful,
fraudulent intent, as where a debtor attempts to prejudice the legal or equitable rights of creditors,
or to take advantage of a transfer to personally benefit at the expense of creditors.37
“‘[T]he desire to convert assets into exempt forms by itself’ does not constitute actual intent
to defraud, . . .;‘extrinsic evidence of fraudulent intent is required to establish fraud.’”38 A debtor’s
32 Rosen v. Bezner, 996 F.2d 1527, 1531 (3d Cir. 1993).
33 Id.
34 Mathai v. Warren (In re Warren), 512 F.3d 1241, 1249 (10th Cir. 2008) (citing In re
Brown, 108 F.3d at 1292).
35 In re Karpuleon, No. 24-80647, 2024 WL 5011412 (Bankr. C.D. Ill. Dec. 6, 2024)
(recognizing majority).
36 In re Warren, 512 F.3d at 1249 (quoting In re Carey, 938 F.2d 1073, 1077 (10th Cir.
1991). See also In re Stratton, 23 B.R. 284, 288 (D.S.D. 1982) (“The language ‘actual intent to
hinder, delay, or defraud’ must be interpreted consistently to mean that the hinderance or delay is
fraudulent.”) (citing Coder v. Arts, 213 U.S. 223 (1909)).
37 Whitaker v. Mortg. Miracles, Inc. (In re Summit Place, LLC), 298 B.R. 62, 70 (Bankr.
W.D.N.C. 2002); In re Stratton, 23 B.R. at 288; In re Karpuleon, 2024 WL 5011412, at *6.
38 In re Carey, 938 F.2d at 1077 (quoting In re Johnson, 880 F.2d 78, 81 (8th Cir.1989)).
subjective intent is “measured at the time of disposition of the non-exempt property.”39 Proof of
a debtor’s intent may be proven by circumstantial evidence including inferences based on a
debtor’s course of conduct.40 Because a debtor seldom readily admits to his or her own subjective
fraudulent intent, courts often consider “badges of fraud” that serve as indicia of the improper
intent required by § 727(a)(2). Among the badges of fraud often considered by courts in the Tenth
Circuit are:
(1) lack or inadequacy of consideration for transfer;
(2) existence of a family, friendship, or special relationship between parties;
(3) attempt by debtor to keep transfer secret;
(4) financial condition of the party sought to be charged both before and after transaction;
(5) existence or cumulative effect of pattern or series of transactions or course of conduct
after incurrence of debt, onset of financial difficulties, or pendency or threat of suits by
creditors; and
(6) overall chronology of events and transactions.41
Cases involving fraudulent intent “are peculiarly fact specific, and the activity in each situation
must be viewed individually.”42 Critically, review of the badges is not a math problem: “[C]ourts
39 4 Collier on Bankruptcy ¶ 522.08 (16th ed. 2025). See also In re Enloe, 542 B.R. 414,
428 (Bankr. S.D. Tex. 2015) (“The operative date is not [debtor]’s state of mind as of the petition
date, but rather his state of mind when he made the transfers.” (citing Cipolla v. Roberts (In re
Cipolla), 476 F. App’x 301, 306 (5th Cir. 2012))).
40 In re Warren, 512 F.3d at 1249 (“Fraudulent intent . . . may be established by
circumstantial evidence, or by inferences drawn from a course of conduct.” (quoting Farmers
Coop. Ass’n of Talmage, Kan. v. Strunk, 671 F.2d 391, 395 (10th Cir. 1982))); In re Brown, 108
F.3d at 1293-94; In re Carey, 938 F.2d at 1077; Parks v. Anderson, 406 B.R. 79, 96-97 (D. Kan.
2009).
41 Freelife Int’l, LLC v. Butler (In re Butler), 377 B.R. 895, 916-17 (Bankr. D. Utah 2006)
(internal citations and footnotes omitted).
42 In re Carey, 938 F.2d at 1077.
look to whether the aggregate of facts demonstrates an inference of fraud rather than requiring the
plaintiff to show a majority or any specific number of the badges.”43 A “pattern of wrongful
behavior” may indicate wrongful intent sufficient to deny discharge under § 727(a)(2).44
Application
It is well settled law that conversion of non-exempt assets into exempt assets can constitute
a transfer under § 727(a)(2).45 In this case, Defendant admits that within the one year prior to the
Petition Date, she paid $39,156.63 in attorney’s fees to her counsel in the State Court Litigation,
and made payments totaling $20,272.74 to various contractors related to the Structure. Although
she takes the position that some of the expended funds, particularly from the refinance of her
mortgage and from retirement funds, were exempt prior to their withdrawal, Defendant does not
dispute that the funds were non-exempt after they were transferred to her checking account prior
to being transferred to contractors or attorneys. The first three elements of the test under
§ 727(a)(2)(A) are thereby established, leaving only the fourth element for resolution: whether the
transfers to contractors and attorneys were made with the actual intent to hinder, delay, or defraud
the Plaintiffs.
First, Plaintiffs object to the continued payment of contractors after Defendant became
aware of their claims in the State Court Litigation. Plaintiffs believe that once Defendant became
aware of their claims regarding the Plat restrictions, she should have admitted defeat, ceased all
further construction activity, and started saving her pennies for the obvious bill for their attorney’s
fees that would soon be forthcoming. Anything less, they posit, is a violation of § 727(a)(2)(A).
43 Horizon Fin. Bank v. Borstad (In re Borstad), 550 B.R. 803, 830 (Bankr. D.N.D. 2016)
(citing Soza v. Hill (In re Soza), 542 F.3d 1060, 1067 (5th Cir. 2008)).
44 In re Butler, 377 B.R. at 916.
45 In re Warren, 512 F.3d at 1249; In re Carey, 938 F.2d at 1077.
Instead, after the State Court entered the Modification Order allowing continued construction of
the lower level of the Structure, Defendant employed Mr. Rick and other contractors to complete
that job. Plaintiffs allege this transfer of non-exempt funds into Defendant’s exempt homestead
was calculated to shield those assets from their collection efforts. Defendant refutes this allegation
and argues that she took pains to comply with all State Court Orders, and that she felt obligated to
pay the bills of her contractors as they were presented, in order to prevent the placement of
materialman’s liens on her homestead.
Second, Plaintiffs fault Defendant for presenting any defense in the State Court Litigation.
Plaintiffs equate Defendant’s presentation of a defense to their claims, including hiring and paying
counsel to represent her in that action, as a fraudulent effort to deprive them of assets that should
have been used to eventually pay their claims. Defendant takes the position that the Structure, as
currently constructed, does not violate the Plat covenants that are the subject of the State Court
Litigation. Defendant testified that her intention in paying ongoing attorney’s fees to her counsel
in the State Court Litigation was to keep them working on her case. While the Court does not take
a position regarding the outcome of the State Court Litigation, it does not find Defendant’s position
in that action to be blatantly frivolous.
Beyond accusing Defendant of making the challenged transfers, Plaintiffs have presented
no “extrinsic evidence” to show that the transfers were made with any fraudulent or unlawful
intent. Plaintiffs did not present an analysis of the badges of fraud commonly applied in this circuit,
and the Court is unable to identify any badges that would warrant denial of Defendant’s discharge.
Defendant has been completely transparent about her use of funds in financing the
Structure and her engagement of counsel in the State Court Litigation. Defendant took no action
to hide or conceal her efforts to complete the lower level of the Structure, or to pay her contractors
for doing so. There is no evidence that Mr. Rick, other contractors, or her State Court counsel are
insiders, or that the transfers to them were gratuitous. Although the transfers happened within one
year of the Petition Date, there was no evidence that Defendant purposely manipulated the timing
of payments to either the contractors or her counsel in order to deprive other creditors of those
funds. To the contrary, Defendant testified that she paid her bills in the ordinary course as they
came due. While Defendant was aware of the pendency of the State Court Litigation, the outcome
of that lawsuit, and therefore the resolution of Plaintiffs’ claims, was far from certain in the year
prior to the Petition Date. Looking at the evidence as a whole, the Court cannot find Plaintiffs have
met their burden of proof to show that any transfers were made fraudulently, or that Defendant
intended to hinder, delay, or defraud Plaintiffs (or any creditor) under § 727(a)(2)(A).
Section 727(a)(4)(A)
Section 727(a)(4)(A) of the Code provides that a discharge may be denied where “the
debtor knowingly and fraudulently, in or in connection with the case . . . made a false oath or
account[.]” Black’s Law Dictionary equates the term “false oath” with the term “perjury,” which
it defines as:
The act or an instance of a person’s deliberately making material false or misleading
statements while under oath; esp., the willful utterance of untruthful testimony
under oath or affirmation, before a competent tribunal, on a point material to the
adjudication. — Also termed false swearing; false oath; falsehood; (archaically)
forswearing.46
46 Perjury, Black’s Law Dictionary (12th ed. 2024); False Oath, Black’s Law Dictionary
(12th ed. 2024).
“The fundamental purpose of § 727(a)(4)(A) is to insure that the trustee and creditors have accurate
information without having to conduct costly investigations.”47 The United States Court of
Appeals for the First Circuit has held that
the very purpose of certain sections of the law, like 11 U.S.C. § 727(a)(4)(A), is to
make certain that those who seek the shelter of the bankruptcy code do not play fast
and loose with their assets or with the reality of their affairs. The statutes are
designed to insure that complete, truthful, and reliable information is put forward
at the outset of the proceedings, so that decisions can be made by the parties in
interest based on fact rather than fiction. As we have stated, “[t]he successful
functioning of the bankruptcy act hinges both upon the bankrupt’s veracity and his
willingness to make a full disclosure.” Neither the trustee nor the creditors should
be required to engage in a laborious tug-of-war to drag the simple truth into the
glare of daylight.48
The test applied under § 727(a)(4)(A) has been distilled to the following elements: (1) that the
debtor made a false statement under oath; (2) that the debtor knew the statement was false; (3) that
the debtor made the statement with fraudulent intent; and (4) that the statement was material.49
Whether a debtor has made a false oath within the meaning of § 727(a)(4)(A) is a question of
fact.50 The subject matter of a false oath is ‘material,’ and thus sufficient to bar discharge, if it
47 Davis v. Weddington (In re Weddington), 457 B.R. 102, 113 (Bankr. D. Kan. 2011)
(citations omitted).
48 Boroff v. Tully (In re Tully), 818 F.2d 106, 110 (1st Cir. 1987) (citations omitted).
49 In re Mosley, 501 B.R. at 742 (citing Rajala v. Majors (In re Majors), No. KS-04-93,
2005 WL 2077497, at *3 (10th Cir. BAP Aug. 29, 2005)). See also In re Brown, 108 F.3d at 1294
(“In order to deny a debtor’s discharge pursuant to this provision [§ 727(a)(4)(A)], a creditor must
demonstrate by a preponderance of the evidence that the debtor knowingly and fraudulently made
an oath and that the oath relates to a material fact.”); Williamson v. Fireman’s Fund Ins. Co., 828
F.2d 249, 251 (4th Cir. 1987) (“In order to be denied a discharge under [§ 727(a)(4)(A)], the debtor
must have made a statement under oath which he knew to be false, and he must have made the
statement willfully, with intent to defraud. . . . The false oath made by the debtor must have related
to a material matter.” (citations omitted)).
50 Williamson, 828 F.2d at 251.
bears a relationship to the bankrupt’s business transactions or estate, or concerns the discovery of
assets, business dealings, or the existence and disposition of estate property.51
A statement contained in a debtor’s schedules or statement of affairs, or the omission of
assets from the same may constitute a false oath for purposes of § 727(a)(4)(A).52 Likewise, a
debtor’s false statement regarding the nature of her debts, if made to avoid application of the means
test under § 707(b), can be grounds for denial of discharge under § 727(a)(4)(A) if the false
statement is made knowingly and fraudulently and is material to the bankruptcy case.53 The United
States Court of Appeals for the Tenth Circuit has noted that “[a] debtor will not be denied discharge
if a false statement is due to mere mistake or inadvertence.”54 We have also been instructed that
“an honest error or mere inaccuracy is not a proper basis for denial of discharge.”55
There is no dispute that Defendant’s responses in the Petition regarding the nature of her
debts were statements made under oath.56 The threshold issue before the Court is whether
Defendant’s characterization of her debts as not primarily consumer debts constitutes a false
oath.57 The Bankruptcy Code defines a “consumer debt” as a “debt incurred by an individual
51 UST v. Garland (In re Garland), 417 B.R. 805, 814 (10th Cir. BAP 2009); Job v. Calder
(In re Calder), 907 F.2d 953, 955 (10th Cir. 1990); Chalik v. Moorefield (In re Chalik), 748 F.2d
616, 618 (11th Cir. 1984).
52 See In re Calder, 907 F.2d at 955; Woolman v. Wallace (In re Wallace), 289 B.R. 428,
434 (Bankr. N.D. Okla. 2003).
53 Fraleigh v. Fraleigh (In re Fraleigh), 474 B.R. 96, 105 (Bankr. S.D.N.Y. 2012)
(“Statements made on the means test and schedules are made ‘under oath’ for purposes of section
727(a)(4).”) (citing Bernhardt v. Radloff (In re Radloff), 418 B.R. 316 (Bankr. D. Minn. 2009)).
54 In re Brown, 108 F.3d at 1294.
55 Id. at 1295.
56 Case No. 24-10239, ECF No. 1, at 6 (debtor’s signature under penalty of perjury that
information provided in the Petition is true and correct). See also In re Fraleigh, 474 B.R. at 105;
In re Radloff, 418 B.R. at 321-22.
57 See ECF No. 74, at 1-2 (Plaintiffs bring their Complaint . . . for a denial of Defendant’s
discharge under 11 U.S.C. § 727(a)(4)(A) for making a false oath in her bankruptcy petition that
her debts were not primarily consumer in nature.”).
primarily for a personal, family, or household purpose.”58 Numerous Code sections refer to the
term consumer debt.59 “[T]here is a natural presumption that identical words used in different
parts of the same act are intended to have the same meaning.”60 Therefore, to determine the
meaning of consumer debt for the purposes of applying § 101(8), the Court may look to the use or
interpretation of the term consumer debt in other contexts within the Code.61
Courts generally construe the term consumer debt narrowly.62 When determining whether
a debt is a consumer debt, courts usually examine the purpose for which the debt was incurred.63
Courts in this circuit have found debt incurred for a business venture or with a profit-motive is not
consumer debt because it is not “debt incurred by an individual primarily for a personal, family,
or household purpose.”64 But debt need not be classified as business debt to fall outside the
definition of consumer debt.65 As this Court has noted, “Congress did not define ‘consumer debt’
58 § 101(8).
59 See, e.g., § 524(c)(6)(B) (excepting consumer debts secured by real estate from
reaffirmation requirements); § 707(b)(1) (providing for dismissal of chapter 7 cases filed by
individual debtors “whose debts are primarily consumer debts” for substantial abuse); § 523(d)
(requiring court to award attorney’s fees to a debtor if, without a basis that is “substantially
justified,” a creditor “requests a determination of dischargeability of a consumer debt under
[§ 523(a)(2)]”).
60 Atl. Cleaners & Dyers v. United States, 286 U.S. 427, 433 (1932); In re Runski, 102 F.3d
744, 746 (4th Cir. 1996).
61 See In re Sijan, 611 B.R. 850, 855 (Bankr. S.D. Ohio 2020); In re Álvarez Vélez, 617
B.R. 158, 169 n.6 (1st Cir. BAP 2020).
62 In re Álvarez Vélez, 617 B.R. at 169–70; In re Sijan, 611 B.R. at 855; In re White, 49
B.R. 869, 872 (Bankr. W.D.N.C. 1985).
63 In re Álvarez Vélez, 617 B.R. at 170; Palmer v. Laying, 559 B.R. 746, 750 (D. Colo.
2016) (“the primary purpose for which the debt was incurred must be determinative.”).
64 In re Stewart, 175 F.3d 796, 806 (10th Cir. 1999) (“‘Consumer debt’ is further
distinguished from ‘non-consumer’ debt as a debt incurred with a ‘profit motive.’”) (citing Citizens
Nat’l Bank v. Burns (In re Burns), 894 F.2d 361, 363 (10th Cir. 1990)).
65 In re Westberry, 215 F.3d 589, 593 (6th Cir. 2000) (“Therefore, while the profit motive
analysis may assist in the determination of which debts are not consumer debt, it does not prohibit
other debts from falling outside of the category of consumer debt.”); In re Álvarez Vélez, 617 B.R.
at 170; In re Marshalek, 158 B.R. 704, 708 (Bankr. N.D. Ohio 1993) (“An inability to classify a
particular debt as a business debt does not automatically relegate it to the status of a consumer
as a ‘debt incurred by an individual having no profit motive,’ but rather as a ‘debt incurred by an
individual for a personal, family or household purpose’.”66
When determining whether a non-business debt is a consumer debt, courts often consider
whether the individual voluntarily intended to incur the debt for a personal, family, or household
purpose. Implicit in the Code’s definition of consumer debt is the element of volition.67 That is,
the subject indebtedness must necessarily be voluntarily “incurred” by the debtor for the purposes
specified in § 101(8).68 As one court explained, “a consumer debt is one that is ‘incurred’—
implying that some voluntary action is taken before a consumer becomes liable on the debt.”69
While the action leading to the liability may have been intentional, if the debtor did not
debt.” (citing In re White, 49 B.R. at 869)); In re Brashers, 216 B.R. 59 (Bankr. N.D. Okla. 1998)
(finding tax liability is not “incurred” as part of consumption activity, but is involuntarily imposed
in the course of earning income).; In re Peterson, 524 B.R. 808, 812–13 (Bankr. S.D. Ind. 2015)
(“The mere fact that the Judgment is not a ‘business’ debt does not mean it per se fits the definition
of a ‘consumer’ debt. . . . A ‘consumer debt’ is only a subset of ‘non business debt’”); In re Stewart,
201 B.R. 996, 1004–05 (Bankr. N.D. Okla. 1996) (“Profit motive is relevant but not necessarily
decisive, for several reasons.”), aff’d, 215 B.R. 456 (10th Cir. BAP 1997), aff’d, 175 F.3d 796
(10th Cir. 1999).
66 In re Stewart, 201 B.R. at 1005.
67 In re Marshalek, 158 B.R. at 707; In re Álvarez Vélez, 617 B.R. at 170; In re Westberry,
215 F.3d at 591; In re Stewart, 201 B.R. at 1004 (“The term ‘consumer debt’ as used in § 707(b)
serves to direct the Court’s attention to a type of bankruptcy case which is especially liable to
abuse and especially deserving of review. That type of case involves an individual debtor who
voluntarily (in the sense of ‘on his initiative, at his option’) takes advantage of modern easy-credit
practices to accumulate debts, for the immediate purpose of satisfying his private appetites and
maintaining or enhancing his personal qualities and lifestyle, or those of his dependents—often in
circumstances which offer creditors little security, because the benefits acquired by the debts are
used up (‘consumed’) by the debtor himself and assimilated to his person—and who effectively
avoids repayment by keeping his unconsumed property and his income from wages or professional
earnings to himself and from his creditors, despite even bankruptcy, e.g. pursuant to 11 U.S.C. §§
522(b), 524(a)(2), 541(a)(6).”).
68 In re Marshalek, 158 B.R. at 707; In re Álvarez Vélez, 617 B.R. at 170; In re Westberry,
215 F.3d at 591 (“incurrence” of tax debt not voluntary).
69 In re Stovall, 209 B.R. 849, 854 (Bankr. E.D. Va. 1997) (“debt for personal property tax
is not a consumer debt even where the property being taxed is held for personal, family, or
household use.”).
intentionally incur the debt or judgment, it will not be considered consumer debt for purposes of
§ 101(8).70 For example, debts for personal tax liability,71 civil torts related to the negligent
operation of a vehicle,72 emergency medical treatment,73 an intentional tort judgment stemming
from improper access to medical information,74 monetary sanctions awarded in litigation,75 and a
breach of warranty in connection with the sale of real property,76 have all been found to be non-
consumer debt. Conversely, debts for voluntarily incurred legal fees related to a “personal, family,
or household” matter, such as a divorce action, have been construed as consumer debts.77
The case of In re Álvarez Vélez is instructive.78 In that case, the Bankruptcy Appellate Panel
for the First Circuit addressed whether a debt qualified as a consumer debt in the context of the
co-debtor stay under § 1301. In re Álvarez Vélez originated as state court litigation between
neighbors, involving a petition for injunctive relief and damages against the debtor and her spouse
for possession of numerous animals, excessive noise, and interference with the plaintiffs’ use and
enjoyment of their property, as well as an action for a declaratory judgment and injunctive relief
related to discrimination and violation of federal housing statutes. By the time the debtor filed
70 In re Álvarez Vélez, 617 B.R. at 170; In re Peterson, 524 B.R. at 813 (stating that
although a tortious act that led to a judgment may have been undertaken voluntarily, the judgment
itself was involuntarily incurred and was “not the type of debt that the Debtor would expect to
incur in her daily affairs”).
71 In re Brashers, 216 B.R. at 59; In re Westberry, 215 F.3d at 589.
72 In re White, 49 B.R. at 869; In re Marshalek, 158 B.R. at 704, In re Alvarez, 57 B.R. 65,
66 (Bankr. S.D. Fla. 1985) (“This Court finds that tort liability as a result of the actionable
negligence of a driver causing an automobile accident is not a consumer debt.”).
73 In re Sijan, 611 B.R. at 856-57 (distinguishing debt for emergency medical treatment
from voluntarily incurred medical treatment).
74 In re Peterson, 524 B.R. at 808. Cf. In re Izzi, 196 B.R. 727, 731 (Bankr. E.D. Pa. 1996)
(debt arising from tort liability (assault) was “clearly not a consumer debt” for purposes of § 1301).
75 In re Álvarez Vélez, 617 B.R. at 172 (citing cases).
76 In re Gorina, 296 B.R. 23, 27 (Bankr. C.D. Cal. 2002).
77 Patti v. Fred Ehrlich, PC, 304 B.R. 182, 188 (E.D. Pa. 2003) (finding legal fees incurred
for representation of co-debtor in divorce proceedings was consumer debt).
78 617 B.R. 158 (1st Cir. BAP 2020).
bankruptcy, the plaintiffs held unadjudicated claims for damages and unliquidated sanctions
awards of attorney’s fees related to the litigation. The BAP affirmed the bankruptcy court’s finding
that such debts were not consumer debts, and therefore the co-debtor stay of § 1301 did not protect
the debtor’s non-filing spouse from further collection action and litigation of the plaintiffs’
claims.79
In reaching its conclusion, the BAP noted that attorney’s fees imposed by a court as a
sanction do not constitute consumer debt under the Bankruptcy Code, regardless of the nature of
the action in which they were imposed.80 The court also found that plaintiff’s claim for a potential
damages award was not a consumer debt because it had not been voluntarily incurred, and was
not the type of debt the debtor would expect to incur in her daily affairs.81 The BAP reasoned:
Although [debtor’s] use of the Property (and her ownership of numerous animals)
may have been undertaken voluntarily and for a personal or family purpose, the
record does not support a conclusion that she intended to incur any debt to the
[plaintiffs] arising from her use of the Property. It would be illogical to suggest that
[the co-debtor] would voluntarily incur the imposition of an adverse judgment in
the local court. Indeed, the litigation in that court suggests that she is resisting the
entry of judgment against her. It follows, therefore, that the bankruptcy court did
not err in determining that the [plaintiffs’] damages claim did not constitute
consumer debt, and that the co-debtor stay of § 1301(a) did not apply.82
This Court finds the analysis of the BAP in In re Álvarez Vélez compelling. The Court need
not formally adopt its holding here, but simply discusses the case to show that authority exists
finding that the consumer debt inquiry under § 101(8) may turn on whether the debtor voluntarily
incurred the debt primarily for a personal, family, or household purpose, and that debts arising
79 Id. at 172.
80 Id. at 171 (citing cases).
81 Id. at 172 (citing In re Peterson, 524 B.R. at 813).
82 Id. (citations omitted).
from involuntary obligations such as tort judgments and similar civil liabilities will likely fall
outside that definition.
Application
Returning to the instant case, the issue of whether Defendant’s debts to Plaintiffs or other
potential claimants are consumer debts is not before the Court. Therefore, the Court has not made
any effort to scrutinize each debt or make its own analysis of how Defendant should have
categorized them. The only issue before the Court is whether Defendant’s characterization of her
debts in the Petition as not primarily consumer debts is objectively false, or although technically
true, so misleading as to be the equivalent of a false statement.
Plaintiffs clearly believe that Defendant should have characterized her debts as primarily
consumer debts, and that her failure to do so was a knowing, fraudulent, and material false oath.
Plaintiffs’ logic runs as follows: Defendant admits that the majority of her debt, consisting largely
of contingent damages and attorney’s fees involving alleged violations of the Plat covenants, is
related to the Structure. Defendant admits that the Structure was erected primarily for a personal,
family, or household purpose. Ergo, Plaintiffs conclude, the majority of Defendant’s debt must be
attributed to a personal, family, or household purpose. While the logic of Plaintiffs’ argument
seems sound, the legal authority for it is lacking.
As noted supra, although non-binding and not precedential, several courts have found that
damages and attorney fees awarded in civil tort litigation do not constitute consumer debt under
§ 101(8).83 Plaintiffs have cited no authority to the contrary. Besides indicating that they disagree
with the way Defendant has characterized her debts as consumer or non-consumer, Plaintiffs have
not provided any accounting or analysis to show which debts they believe have been improperly
83 See supra notes 71-76 and accompanying text.
characterized. Nor have they presented any evidence that Defendant was attempting to mislead,
deceive, or defraud any party. As such, there is simply no basis for the Court to find that
Defendant’s statement on her Petition that her debts are not “primarily consumer debts” is false,
much less materially false, much less made knowingly and fraudulently. In the absence of finding
any materially false statement made under oath, the Court finds Plaintiffs have not established a
prima facie case under § 727(a)(4)(A). Therefore, no burden shifts to Defendant, and the Court
need not consider any defenses she has raised.
Section 523(a)(6)
Lastly, Plaintiffs contend their debt should be excepted from discharge pursuant to
§ 523(a)(6), which provides:
(a) A discharge under section 727 . . . of this title does not discharge an individual
debtor from any debt—
. . .
(6) for willful and malicious injury by the debtor to another entity or to the
property of another entity[.]
The United States Bankruptcy Appellate Panel of the Tenth Circuit has recently issued guidance
on the interpretation of § 523(a)(6) as follows:
[P]roof of a “willful and malicious injury” under § 523(a)(6) requires proof of two
distinct elements — the injury must be both “willful” and “malicious.”
. . . .
For an injury to be “willful,” there must be a deliberate or intentional injury, not
merely “a deliberate or intentional act that leads to injury.” “[T]he (a)(6)
formulation triggers in the lawyer’s mind the category ‘intentional torts,’ as
distinguished from negligent or reckless torts. Intentional torts generally require
that the actor intend ‘the consequences of an act,’ not simply the act itself.” A
willful injury may be established by direct evidence that the debtor acted with the
specific intent to harm a creditor or the creditor’s property, or by indirect evidence
that the debtor desired to cause the injury or believed the injury was substantially
certain to occur. This is a subjective standard.
. . . .
For an injury to be “malicious,” “evidence of the debtor’s motives, including any
claimed justification or excuse, must be examined to determine whether the
requisite ‘malice’ in addition to ‘willfulness’ is present.” “[A]ll the surrounding
circumstances, including any justification or excuse offered by the debtor, are
relevant to determine whether the debtor acted with a culpable state of mind vis-a-
vis the actual injury caused the creditor.” A willful and malicious injury requires
more than negligence or recklessness. Six circuit courts have defined the
“malicious” element to require an act taken in conscious disregard of one’s duties
and without just cause or excuse, even in the absence of personal hatred, spite or
ill-will, or wrongful and without just cause or excuse. These definitions are similar
to the pre-Geiger definition of “malicious” adopted by the Tenth Circuit in In re
Pasek. . . . For an injury to be “malicious,” therefore, the debtor’s actions must be
wrongful.84
In order for conduct to be willful under § 523(a)(6), “the debtor must desire . . . [to cause]
the consequences of his act or . . . believe [that] the consequences are substantially certain to result
from it.”85 This can include a “deliberate or intentional invasion of the legal rights of another,
because the word ‘injury’ usually connotes legal injury (injuria) in the technical sense[.]”86 A
court’s determination under § 523(a)(6) requires a subjective assessment of the debtor’s
knowledge and motives, including any claimed justification or excuse.87 “The subjective standard
84 First Am. Title Ins. Co. v. Smith (In re Smith), 618 B.R. 901, 912, 919 (10th Cir. BAP
2020) (citations omitted). See also Kawaauhau v. Geiger, 523 U.S. 57 (1998); Dorr, Bentley &
Pecha, CPA’s, P.C. v. Pasek (In re Pasek), 983 F.2d 1524 (10th Cir. 1993) (adopting separate
standards for “willful” and “malicious” under § 523(a)(6)); Glencove Holdings, LLC v. Bloom (In
re Bloom), No. 22-1005, 2022 WL 2679049, at *7 (10th Cir. July 12, 2022) (unpublished)
(adopting analysis of In re Smith, 618 B.R. at 919); Swan Pediatric Dental, LLC v. Hulse (In re
Hulse), No. 22-001, 2022 WL 16826561, at *7–8 (10th Cir. BAP Nov. 8, 2022) (citing In re Smith,
618 B.R. at 912).
85 Panalis v. Moore (In re Moore), 357 F.3d 1125, 1129 (10th Cir. 2004) (quoting
Mitsubishi Motors Credit of Am., Inc. v. Longley (In re Longley), 235 B.R. 651, 657 (10th Cir.
BAP 1999)).
86 In re Geiger, 113 F.3d 848 (8th Cir. 1997), aff’d sub nom. Kawaauhau v. Geiger, 523
U.S. at 57.
87 In re Pasek, 983 F.2d at 1527; Carrillo v. Su (In re Su), 290 F.3d 1140, 1146 (9th Cir.
2002); First Nat’l Bank of Md. v. Stanley (In re Stanley), 66 F.3d 664, 668 (4th Cir. 1995) (“[I]t is
the debtor’s subjective state of mind that is relevant; it does not matter that a ‘reasonable debtor’
should have known that his act would adversely affect another’s rights.”); In re Smith, 618 B.R. at
919; Baner v. Charles (In re Charles), No. 17-12568, 2023 WL 3066684, at *8 (Bankr. D. Nev.
Apr. 24, 2023) (“Section 523(a)(6)’s willful injury requirement is met ‘only when the debtor has
a subjective motive to inflict injury or when the debtor believes that injury is substantially certain
to result from his own conduct.’” (quoting In re Su, 290 F.3d at 1142)).
correctly focuses on the debtor’s state of mind and precludes application of § 523(a)(6)’s
nondischargeability provision short of the debtor’s actual knowledge that harm to the creditor was
substantially certain.”88 Debts arising from recklessly or negligently inflicted injuries are not
covered by § 523(a)(6).89 In conducting such an inquiry, a court is not limited to self-serving
statements from the debtor; “[i]n addition to what a debtor may admit to knowing, the bankruptcy
court may consider circumstantial evidence that tends to establish what the debtor must have
actually known when taking the injury-producing action.”90 “A totality of the circumstances
inquiry is fact specific and hinges on the credibility of witnesses.”91
In the Tenth Circuit, “malicious intent [may] be demonstrated by evidence that the debtor
had knowledge of the creditor’s rights and that, with that knowledge, proceeded to take action in
violation of those rights.”92 A debtor’s actions must have been wrongful and done without just
cause or excuse, i.e., constructive or implied malice.93 Personal animus, personal hatred, spite or
ill-will, i.e., express malice, is not required.94 Maliciousness will be found by imputation
88 In re Su, 290 F.3d at 1146. See also In re Charles, 2023 WL 3066684, at *11 (“[E]ven
substantial certainty of injury under § 523(a)(6) remains dependent upon the debtor’s subjective
belief. In Su, the Ninth Circuit rejected the objective application of substantial certainty of harm
to prove willfulness under § 523(a)(6).”).
89 Geiger, 523 U.S. at 64; In re Smith, 618 B.R. at 913.
90 In re Su, 290 F.3d at 1146 n.6. See also Tobias v. Alvarado (In re Alvarado), 608 B.R.
877, 885 (Bankr. W.D. Okla. 2019) (“Because fraudulent intent is rarely admitted by a debtor,
courts uniformly recognize it may be established by circumstantial evidence or by inferences
drawn from a course of conduct or from the totality of the circumstances.” (citations omitted)).
91 Graham v. Graham (In re Graham), 600 B.R. 90, 95-96 (Bankr. D. Kan. 2019).
92 In re Pasek, 983 F.2d at 1527 (internal quotation marks and citation omitted).
93 In re Smith, 618 B.R. at 919 n.116 (citing Murphy v. Snyder (In re Snyder), 939 F.3d 92,
105 (2d Cir. 2019)). See also Voyatzoglou v. Hambley (In re Hambley), 329 B.R. 382, 402 (Bankr.
E.D.N.Y. 2005) (“This element can be satisfied by either actual or constructive malice.”).
94 In re Bloom, 2022 WL 2679049, at *7 (citing In re Smith, 618 B.R. at 919). See also
Park v. Sec. Bank & Tr. Co., 1973 OK 72, 512 P.2d 113 (distinguishing express from implied
malice); In re Snyder, 939 F.3d at 105 (citing Ball v. A.O. Smith Corp., 451 F.3d 66, 69 (2d Cir.
2006)); Kane v. Stewart Tilghman Fox & Bianchi Pa (In re Kane), 755 F.3d 1285, 1294 (11th Cir.
2014); Old Republic Nat’l Title Ins. Co. v. Levasseur (In re Levasseur), 737 F.3d 814, 818 (1st
where the debtor has breached a duty to the plaintiff founded in contract, statute or
tort law, willfully in the sense of acting with deliberate intent, in circumstances
where it is evident that the conduct will cause injury to the plaintiff and, most
important, and under some aggravating circumstance such as to warrant denial of
discharge.95
For an injury to be malicious, the debtor must be conscious that their actions are wrongful.96
Courts have found that under certain circumstances, sanctions for violating court orders
may be non-dischargeable under § 523(a)(6).97 In order for a monetary sanction to be excepted
from discharge, the conduct that resulted in the sanction must have been “willful” and “malicious”
as those terms are construed for the purpose of § 523(a)(6). Mere failure to comply with a court
order is not sufficient, as a debtor may have some justification or excuse, or the debtor may have
been negligent or inattentive, or the debtor may not have intended to harm the creditor.98 Under
Oklahoma law, violation of an injunction or restraining order issued, either for protection of or
enforcement of a private right, constitutes an “indirect contempt” of court.99 Indirect contempt of
court is defined as: “willful disobedience of any process or order lawfully issued or made by court;
resistance willfully offered by any person to the execution of a lawful order or process of a
Cir. 2013); In re Thirtyacre, 36 F.3d 697, 700 (7th Cir. 1994); Wheeler v. Laudani, 783 F.2d 610,
615 (6th Cir. 1986).
95 Bundy Am. Corp. v. Blankfort (In re Blankfort), 217 B.R. 138, 144 (Bankr. S.D.N.Y.
1998). See also In re Hambley, 329 B.R. at 402.
96 In re Bloom, 2022 WL 2679049, at *7 (citing In re Smith, 618 B.R. at 919); In re
Levasseur, 737 F.3d at 818 (“The injury must have been committed in ‘conscious disregard of
one’s duties.’”); ABF, Inc. v. Russell (In re Russell), 262 B.R. 449, 455 (Bankr. N.D. Ind. 2001)
(“[A] debtor’s actions are not automatically labeled malicious simply because they are wrongful.
There must also be a consciousness of wrongdoing. It is this knowledge of wrongdoing, not the
wrongfulness of the debtor’s actions, that is the key to malicious under § 523(a)(6). Without it
there can be no ‘conscious disregard of one’s duties,’ only an unconscious one.” (citations
omitted)).
97 Moses v. Seeberger (In re Seeberger), No. 10-11858, 2011 WL 6749049, at *22 (Bankr.
N.D. Okla. Dec. 22, 2011); In re Suarez, 400 B.R. 732 (9th Cir BAP. 2009); Liddell v. Peckham
(In re Peckham), 442 B.R. 62 (Bankr. D. Mass. 2010).
98 In re Seeberger, 2011 WL 6749049, at *22 n.170.
99 Malnar v. Whitfield, 1989 Okla. Civ. App. 28, 774 P.2d 1075.
court.”100
Application
Plaintiffs’ contempt charges against Defendant have not been adjudicated in the State Court
Action. While this Court does not have jurisdiction to litigate the issue of contempt for violation
of the State Court orders,101 it does have the authority to determine if, as a factual matter, a
violation of any State Court order occurred, and if so, whether Defendant committed the violation
willfully and maliciously—that is without just cause or excuse and knowing or intending that the
violations would harm Plaintiffs.
We begin with the language of the State Court TRO and Temporary Injunction. An
injunction, by definition, is “a command to refrain from a particular act.”102 The TRO ordered that
Defendant and her agents were temporarily enjoined from “performing any further construction
on” the Structure, including “the installation of any electrical or plumbing fixtures or materials in
or on” the Structure, and from “allowing any person . . . to occupy” the Structure.103 The
Temporary Injunction enjoined Defendant and her agents from “any further construction” on the
Structure, and from “allowing any person to occupy” the Structure.104
Plaintiffs alleged several violations of the TRO and/or Temporary Injunction, but most are
without evidentiary support. Two actions, both admitted by Defendant, warrant discussion. While
not directly admitting to violation of the TRO or Temporary Injunction, Defendant admits that 1)
she either explicitly or implicitly allowed Mr. Rick and other contractors to secure the building
100 Okla. Stat. tit. 21, § 565. See also Seifried v. State ex rel. Bash, 1939 OK 28, 86 P.2d
1008, 1010; Blanton v. State, 31 Okla. Crim. 419, 239 P. 698 (1925).
101 See Cooper v. Cooper,1980 OK 128, 616 P.2d 1154, 1156 (contempt proceedings triable
only by court against whose authority contempt is charged).
102 Okla. Stat. tit. 12, § 1381.
103 Defendant’s Ex. 117.
104 ECF No. 25-2. See supra note 9.
site after she became aware of the TRO; and 2) she allowed Mr. Rick and other contractors to
resume construction on the downstairs portion of the Structure after she received the Erroneous
Order. Because of the posture of this matter, the Court need not, and will not, make any legal
finding about whether such actions constitute a violation of either the TRO or the Temporary
Injunction, nor will it determine whether Defendant violated any legal right of Plaintiffs. Such a
finding is simply not necessary here because, even if the Court were to find such injury, there has
been no showing that any action of Defendant rises to the level of malicious injury under §
523(a)(6).
With respect to the alleged violation of the TRO, both Defendant and Mr. Rick testified
regarding their actions and motivations after they were informed that no further construction on
the Structure was allowed. Mr. Rick testified that upon becoming aware of the TRO, his crew
picked up their tools and left for the day. An entry door to the Structure had been installed
incorrectly, and a carpenter returned to the Structure to correct the installation for the sole purpose
of making sure the door could be locked. Additionally, a garage door to the Structure had been
installed without a seal, and a contractor returned to the Structure to add the missing seal. Both
actions were specifically taken to secure the Structure and the materials inside. Mr. Rick also
testified that his crew filled in an open ditch on Defendant’s Property surrounding the Structure
that held water lines and conduit, in order to make the premises safe. In addition, Mr. Rick
described a situation where a contractor returned to the Structure without authorization from him
or Defendant and installed a meter box and power head. The motivation of the contractor appears
to be a wish to be paid for his work, which would not have happened if it was left undone.105
Defendant testified that, although she asked Mr. Rick and his crew to stop work immediately, she
105 Plaintiffs’ Ex. 26, at 2 ¶ 9.
took responsibility for allowing them to secure the Structure and materials, and to take necessary
measures to ensure the safety of the premises.
With respect to the alleged violation of the Temporary Injunction, Defendant admits that
in September 2023, after being informed of the Erroneous Order, she authorized Mr. Rick to
resume work on the downstairs portion of the Structure, in compliance with its terms. Defendant
credibly testified that she had no reason to question the legitimacy of the Erroneous Order,
especially because it was consistent with requests made by her counsel in the Second Application
to the State Court. Despite Plaintiffs’ allegations that Defendant “must” have known that the
Erroneous Order was invalid, they presented no evidence of that fact. Both Defendant and Mr.
Rick testified that they ceased work immediately upon learning of the invalidity of the Erroneous
Order.
The Court finds that it need not make any finding regarding whether Defendant caused
Plaintiffs injury as a result of her actions because Plaintiffs have not met their burden to show by
a preponderance of evidence that any action of Defendant was made in a malicious manner. From
Defendant’s demeanor and testimony, the Court believes she made sincere efforts to comply with
both the letter and spirit of the TRO and Temporary Injunction. Although Defendant admits that
she at times put the security and safety of her home and family above the technical words of the
State Court orders, there was no evidence that she took a cavalier attitude towards her obligations
thereunder, that she sought to gain any sort of advantage in the State Court Litigation, or that she
purposely chose to drive up Plaintiffs’ litigation costs. To the extent that any action by Defendant
can be seen as wrongful (which this Court is explicitly not finding), she has presented sufficient
justification for each such action. Under the totality of the circumstances, Plaintiffs have not met
their burden to show they hold a nondischargeable debt under § 523(a)(6).
Conclusion
A discharge in bankruptcy is reserved for the honest but unfortunate debtor.106 Despite
Plaintiffs’ overwhelming attempts to prove otherwise, the Court found Defendant to be honest and
forthcoming in her dealings with both Plaintiffs and the Court. The Court found no evidence that
Defendant attempted to intentionally move assets to the detriment of Plaintiffs. Nor did the Court
find any evidence Defendant attempted to hide or conceal assets, or to mislead the Court or
creditors through misrepresentations in her Petition. Likewise, “[e]xceptions to discharge are to
be narrowly construed, and because of the fresh start objectives of bankruptcy, doubt is to be
resolved in the debtor’s favor.”107 The Court found no evidence that Defendant willfully and
maliciously violated court orders to gain advantage in the State Court Litigation. To the contrary,
the Court found Defendant was conscientious and careful to obey orders, while being cognizant of
the practical realities of safety and security on a modern construction site. Far from being willful
and malicious, the Court found Debtor’s behavior to be considered and reasonable.
Defendant shall be granted a discharge in Case No. 24-10239-T. Plaintiffs’ claims against
Defendant are dischargeable in the bankruptcy case. A separate judgment consistent with this
Memorandum Opinion shall be issued concurrently herewith.
###
106 Grogan v. Garner, 498 U.S. 279, 286–87 (1991) (“[I]n the same breath that we have
invoked this ‘fresh start’ policy, we have been careful to explain that the Act limits the opportunity
for a completely unencumbered new beginning to the ‘honest but unfortunate debtor.’”).
107 Affordable Bail Bonds, Inc. v. Sandoval (In re Sandoval), 541 F.3d 997 (10th Cir. 2008)
(quoting Bellco First Fed. Credit Union v. Kaspar (In re Kaspar), 125 F.3d 1358 (10th Cir. 1997)).