Generally, when a person (known as the debtor) files for bankruptcy under chapter 7 of the United States Bankruptcy Code all of a debtor’s debts at the time of filing are discharge. See 11 U.S.C. §727.
Several exceptions to discharge apply. One such exception is
"for willful and malicious injury by the debtor to another entity or to the property of another entity"
11 U.S.C. §523 (a)(6)
Recently Judge Christopher J. Panos, was faced with determining if the §523(a)(6) exception to discharge applied when a debtor misclassified employees as independent contractors and did not pay overtime to the employees.
"A determination a debt is nondischargeable pursuant to § 523(a)(6) requires a showing of three elements: "that 1) the creditor suffered injury; 2) the debtor intended to cause the injury or that there was substantial certainty that the injury would occur; and 3) the debtor had no justification or excuse for the action resulting in injury."
Simões v. Sivieri (In re Sivieri), Nos. 19-14253-CJP, 20-01034-CJP, 2022 Bankr. LEXIS 2697, at *4 (Bankr. D. Mass. Sep. 29, 2022)
After a three-day trial and testimony from the Debtor and the two employees who brought the lawsuit, Judge Panos determined that
"non-payment of overtime to the Plaintiffs under Massachusetts law, alone, does not satisfy the requirements of § 523(a)(6)."
Simões v. Sivieri (In re Sivieri), Nos. 19-14253-CJP, 20-01034-CJP, 2022 Bankr. LEXIS 2697, at *24 (Bankr. D. Mass. Sep. 29, 2022)
The Court went on to discharge the Debtor of his obligations to the two former employees.
"the Court hereby enters judgment in favor of the Defendant and against the Plaintiffs with respect to the Complaint. The debts of the Defendant to the Plaintiffs shall be discharged."
Simões v. Sivieri (In re Sivieri), Nos. 19-14253-CJP, 20-01034-CJP, 2022 Bankr. LEXIS 2697, at *27-28 (Bankr. D. Mass. Sep. 29, 2022)
Both debtors and employees should be very careful about unpaid wages. Debtor / employers may have liability to MGL c. 149 §148B(a) and could be subject to strict consequences in and outside of bankruptcy.
Employees should move quickly when facing unpaid wages to ensure timely collection of debts.