Filling in the Blank: Defining Breaches ofContract Excepted from Discharge as Willfuland Malicious Injuries to Property Under 11IU.S.C. § 523(a)(6)

Table of ContentsI. Introduction 694II. Compatibility of Intent Analysis with Contract Law 700A. Comparison of Conventional Contract and Tort Doctrines 700B. Why Punitive Damages Are Awarded in Tort and Not in Contract: Intent as the Deciding Factor 702C. Modern Trends: Difficulty of Incorporating State of Mind Analysis in Contract Law 704III. Introducing Uncertainty: § 523(a)(6)' s Willful and Malicious Requirement 706A. Introduction 706B. Pre-Geiger Analysis of "Willful and Malicious" 707C. Kawaauhau v. Geiger. Attempt at Clarifying the Meaning of Willful and Malicious 711D. Interpretations of "Willful and Malicious Injury" in a Breach of Contract Scenario After Geiger. Overbroad Interpretation of "Malicious" 7131. Interpretation of Malicious in Jurisdictions Requiring Conduct Accompanying a Breach of Contract to Constitute an Intentional Tort 7152. Interpretations of Malicious in Jurisdictions Requiring an Intentional Injury or Belief that an Injury Is Substantially Certain to Occur 7203. Conclusion: Effect of Varying Interpretations 726TV. Clarifying "Willful and Malicious Injury to Property" Under § 523(a)(6) 727A. Conduct Accompanying a Breach of Contract Must Be a Tort Defined by State Law 728B. Defining "Malicious" in the Breach of Contract Scenario to Require an Intentional Tort Eligible for Punitive Damages 729C. Critiques and Defenses of the New Rule 731V. Conclusion 733I. IntroductionOne day, Leslie walks into her local attorney's office and declares that she wants to start a sole proprietorship selling shoes. Unfortunately, due to a teenage spending habit, Leslie does not have enough money to start the business on her own. Leslie needs funding and wants to know the legal consequences of taking out a loan. Because of the current state of the economy,1 Leslie is concerned about what would happen if her shoe business failed. Would she still need to pay back the loan?2The lawyer's initial response, and probably what Leslie expects to hear, is that honest, good faith debts that result from a failing business are discharged in bankruptcy. The Bankruptcy Code provides the entrepreneur with the incentive to take on the risks of running a business by allowing the entrepreneur to erase debt if the business fails.3 Several provisions of the U.S. Bankruptcy Code4 allow for individual entrepreneurs, like Leslie, to discharge debts when in need of relief.5The lawyer, however, cannot just inform Leslie that all debts, including bank loans, are dischargeable.6 The discharge of debt is meant only for the "honest but unfortunate debtor,"7 and in certain situations Congress provided exceptions in which debts incurred by the debtor are not dischargeable.8 The historical reason for keeping some debts on the books despite a bankruptcy filing is to punish entrepreneurs for dishonest, unscrupulous behavior.9 The Code seeks to promote business and economic development by providing a safety net for individuals, like Leslie, who try to run a successful business but fail, while protecting creditors when entrepreneurs incur debt for explicitly identified circumstances that Congress has deemed to be dishonest or unworthy of discharge. …