Court Rejects Strict Liability for Discharge Violations

The Supreme Court rejected a strict-liability standard for the imposition of contempt for violating the discharge injunction. Instead, the justices held unanimously that the bankruptcy court “may impose civil contempt sanctions when there is no objectively reasonable basis for concluding that the creditor’s conduct might be lawful under the discharge order.” The opinion for the Court by Justice Stephen G. Breyer also rejected the Ninth Circuit’s idea that a subjective, good faith belief about the inapplicability of the discharge injunction is a defense to contempt. It is unclear from the opinion whether the Court’s standard for a discharge violation also applies to violations of the automatic stay under Section 362.

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