Bankruptcy

Nifong Files Bankruptcy

By Bob Lawless

Courtesy of the Law Blog over at WSJ.com, I learned that Michael Nifong has filed bankruptcy. Nifong was the district attorney in the rape case against the three Duke lacrosse players. After Nifong was removed from the case, the charges were later dropped. Nifong was accused of withholding evidence and has lost his law license. The bankruptcy petition and schedules are here courtesy of WRAL television in Raleigh-Durham. Apparently, if it bleeds cash, it also leads.

The news reports I have seen have said that Nifong will not be able to use bankruptcy to erase any damages awards against him if the bankruptcy judge determines that Nifong has "committed wrongdoing." That is close but not quite right. The Bankruptcy Code excepts from discharge any debt for a willful and malicious injury. Thus, the bankruptcy court would have to decide not only that Nifong acted wrongfully but that he acted willfully and maliciously. As I tell my students, this is roughly the difference between acting wrongfully and acting wrongfully and meaning it. It's a higher standard than the press has been suggesting.

More interestingly, perhaps, for us bankruptcy jocks is something brought to my attention by Alan White, a law prof over at Valparaiso University. Nifong fails the means test. He has $927.45/month to pay unsecured creditors and hence a presumption of abuse arises. Nifong will have to convert his case to chapter 13 or dismiss unless he can convince the judge other circumstances exist that make his case not an abuse of the bankruptcy process. What can those other circumstances be? The lawsuits against him would not excuse a chapter 7 filing. Indeed, the existence of the lawsuits would tend to support a claim of abuse given that Nifong would be using the bankruptcy process to escape them.

It was not immediately evident to me what Nifong's strategy is here. The bankruptcy filing might buy him some time in the state lawsuits, but toward what end? Does Nifong really want to use chapter 13? Are there serious grounds to contend his case should stay in chapter 7? I've left the comments open for more adept legal minds to speculate on what might be going on.

Full post as published by Credit Slips on January 16, 2008 (boomark / email).