One of the main goals of the Bankruptcy Code is to give honest debtors a chance to start over financially. But to strike a fair balance between helping debtors and protecting creditors’ rights to collect what they’re owed, the Code makes clear that some debts can’t be wiped out—especially when public policy calls for it. That includes debts tied to a debtor’s misconduct. For instance, bankruptcy courts have long held that someone who commits fraud shouldn’t be able to use bankruptcy as a shield. When it comes to defamation claims, the relevant Code section is 11 U.S.C. § 523(a)(6), which blocks the discharge of debts that stem from a debtor’s willful and malicious actions. Is defamation a willful and malicious action? Well, that depends.
Defamation judgments are notoriously difficult to categorize as dischargeable or nondischargeable because the tort of defamation doesn’t fit neatly into a single category, as the level of intent needed to hold someone liable can vary depending on who’s involved. If the person suing is a public figure, for example, they have to show that the defendant either knowingly made a false statement or did so with serious doubts about its truth. If the plaintiff is a private figure, on the other hand, the bar is lower—they just need to show the defendant was careless or negligent, without needing to prove any intent to harm. So bankruptcy courts will normally want to hear some evidence before they will rule on whether a particular defamation judgment is dischargeable.