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5th Circuit Bankruptcy Summary: In re Michael Vernon Shankle, No. 13-60252 (5th Cir. Feb. 7, 2014)

A divorce court entered a decree dividing up the assets of Michael Vernon Shankle and Dianne Shankle.  Michael Vernon Shankle, contrary to the terms of the divorce decree, withdrew all funds from an investment account and spend them for his own benefit.  An Arkansas state court later found Michael in contempt for failing to divide the assets according to the decree, but Michael Vernon Shankle still refused to tender funds to Diane that she was entitled to.  The state court then entered another contempt order and ordered Michael to sign over several accounts to Dianne, which Michael eventually did.

Michael Vernon Shankle later filed Chapter 7 bankruptcy.  He listed a disputed debt to Diane in his schedules.  Subsequently, the state court found Michael liable for $97,435.91 for funds owed to Dianne never paid.  Dianne filed an adversary proceeding seeking to have the $97,435.91 debt deemed non-dischargeable under section 523(a)(6).   After a trial, the bankruptcy court held that the debt was non-dischargeable.  The district court affirmed.  The Fifth Circuit analyzed the standard under section 523(a)(6), which requires willful and malicious injury by the debtor.  An injury is willful and malicious when there is either a subjective motive to cause harm or an objection substantial certainty of harm.  The Fifth Circuit considered each of Michael’s arguments and affirmed the district court on the grounds that the court properly exercised its discretion in finding that Michael’s repeated refusal to transfer marital assets, despite multiple contempt orders, constituted an objection substantial certainty of harm to Dianne.