Does a bankruptcy eliminate a civil judgement? Why wouldn't everyone file and wipe out their civil case debt then? Seems too easy of a workaround.
11 USC §1328 and 11 USC §523(a) lists several categories of debt that can't be discharged. (I'm not sure when only the subset listed under §1328 applies).
Criminal fines are definitely not erased by bankruptcy. Civil judgements owed to any government agency (including fines) are also definitely not erased. As is anything connected to willful injury (NB: I don't know the scope of 'injury' here, it may be limited to direct physical or other medical injury, or it could mean destruction of property and the like). And anything obtained by fraud isn't erased. Also things like alimony can't be discharged.
Would Holmes's debts incurred by the Theranos suits be dischargeable... I don't know.
Not legal advice: if you’re going bankrupt with flush 401ks, IRAs, and a luxury residence, Florida is not a bad state to do it in.
> Just this month, a federal judge in New York discharged more than $220,000 in student loans for a borrower. In her ruling, Chief Bankruptcy Judge Cecelia Morris criticized the fact that even many lawyers "believe it impossible to discharge student loans." She added, "This Court will not participate in perpetuating these myths."
Ruling: https://assets.documentcloud.org/documents/6660178/Rosenberg...
> One factor in considering whether the U.S. Trustee can prevail in a challenge to the debtor's Chapter 7 filing is whether the debtor can otherwise afford to repay some or all of his debts out of disposable income in the five year time frame provided by Chapter 13. If so, then the U.S. Trustee may succeed in preventing the debtor from receiving a discharge under Chapter 7, effectively forcing the debtor into Chapter 13. https://en.wikipedia.org/wiki/Chapter_7,_Title_11,_United_St...
You really don't want to give a Federal officer the power to decide you have too much disposable income for the next five years.
It depends.
In the Holmes case, the plaintiff, if they win, will probably argue that at least part of the settlement should be nondischargeable because Holmes committed fraud.
> Why wouldn't everyone file and wipe out their civil case debt then?
Because either:
1) the courts explicitly disallow it in the particular case; or,
2) the combination of non-exempt assets and continued access to credit is more valuable than the settlement amount (in this case, you would end up paying the entire amount during bankruptcy proceedings in any case anyways, and then have a black mark on your credit for no good reason).
Because bankruptcy involves losing your unsecured assets and adverse credit. The same reason not everyone declares assets to erase their dischargeable debts that aren't civil judgements.