(a) A discharge under section 727, 1141, 1228(a), 1228(b), or 
1328(b) of this title does not discharge an individual debtor from any 
debt--
        (1) for a tax or a customs duty--
            (A) of the kind and for the periods specified in section 
        507(a)(2) or 507(a)(8) of this title, whether or not a claim for 
        such tax was filed or allowed;
            (B) with respect to which a return, if required--
                (i) was not filed; or
                (ii) was filed after the date on which such return was 
            last due, under applicable law or under any extension, and 
            after two years before the date of the filing of the 
            petition; or

            (C) with respect to which the debtor made a fraudulent 
        return or willfully attempted in any manner to evade or defeat 
        such tax;

        (2) for money, property, services, or an extension, renewal, or 
    refinancing of credit, to the extent obtained by--
            (A) false pretenses, a false representation, or actual 
        fraud, other than a statement respecting the debtor's or an 
        insider's financial condition;
            (B) use of a statement in writing--
                (i) that is materially false;
                (ii) respecting the debtor's or an insider's financial 
            condition;
                (iii) on which the creditor to whom the debtor is liable 
            for such money, property, services, or credit reasonably 
            relied; and
                (iv) that the debtor caused to be made or published with 
            intent to deceive; or

            (C) for purposes of subparagraph (A) of this paragraph, 
        consumer debts owed to a single creditor and aggregating more 
        than $1,000 for ``luxury goods or services'' incurred by an 
        individual debtor on or within 60 days before the order for 
        relief under this title, or cash advances aggregating more than 
        $1,000 that are extensions of consumer credit under an open end 
        credit plan obtained by an individual debtor on or within 60 
        days before the order for relief under this title, are presumed 
        to be nondischargeable; ``luxury goods or services'' do not 
        include goods or services reasonably acquired for the support or 
        maintenance of the debtor or a dependent of the debtor; an 
        extension of consumer credit under an open end credit plan is to 
        be defined for purposes of this subparagraph as it is defined in 
        the Consumer Credit Protection Act;

        (3) neither listed nor scheduled under section 521(1) of this 
    title, with the name, if known to the debtor, of the creditor to 
    whom such debt is owed, in time to permit--
            (A) if such debt is not of a kind specified in paragraph 
        (2), (4), or (6) of this subsection, timely filing of a proof of 
        claim, unless such creditor had notice or actual knowledge of 
        the case in time for such timely filing; or
            (B) if such debt is of a kind specified in paragraph (2), 
        (4), or (6) of this subsection, timely filing of a proof of 
        claim and timely request for a determination of dischargeability 
        of such debt under one of such paragraphs, unless such creditor 
        had notice or actual knowledge of the case in time for such 
        timely filing and request;

        (4) for fraud or defalcation while acting in a fiduciary 
    capacity, embezzlement, or larceny;
        (5) to a spouse, former spouse, or child of the debtor, for 
    alimony to, maintenance for, or support of such spouse or child, in 
    connection with a separation agreement, divorce decree or other 
    order of a court of record, determination made in accordance with 
    State or territorial law by a governmental unit, or property 
    settlement agreement, but not to the extent that--
            (A) such debt is assigned to another entity, voluntarily, by 
        operation of law, or otherwise (other than debts assigned 
        pursuant to section 408(a)(3) of the Social Security Act, or any 
        such debt which has been assigned to the Federal Government or 
        to a State or any political subdivision of such State); or
            (B) such debt includes a liability designated as alimony, 
        maintenance, or support, unless such liability is actually in 
        the nature of alimony, maintenance, or support;

        (6) for willful and malicious injury by the debtor to another 
    entity or to the property of another entity;
        (7) to the extent such debt is for a fine, penalty, or 
    forfeiture payable to and for the benefit of a governmental unit, 
    and is not compensation for actual pecuniary loss, other than a tax 
    penalty--
            (A) relating to a tax of a kind not specified in paragraph 
        (1) of this subsection; or
            (B) imposed with respect to a transaction or event that 
        occurred before three years before the date of the filing of the 
        petition;

        (8) for an educational benefit overpayment or loan made, insured 
    or guaranteed by a governmental unit, or made under any program 
    funded in whole or in part by a governmental unit or nonprofit 
    institution, or for an obligation to repay funds received as an 
    educational benefit, scholarship or stipend, unless excepting such 
    debt from discharge under this paragraph will impose an undue 
    hardship on the debtor and the debtor's dependents;
        (9) for death or personal injury caused by the debtor's 
    operation of a motor vehicle if such operation was unlawful because 
    the debtor was intoxicated from using alcohol, a drug, or another 
    substance;
        (10) that was or could have been listed or scheduled by the 
    debtor in a prior case concerning the debtor under this title or 
    under the Bankruptcy Act in which the debtor waived discharge, or 
    was denied a discharge under section 727(a)(2), (3), (4), (5), (6), 
    or (7) of this title, or under section 14c(1), (2), (3), (4), (6), 
    or (7) of such Act;
        (11) provided in any final judgment, unreviewable order, or 
    consent order or decree entered in any court of the United States or 
    of any State, issued by a Federal depository institutions regulatory 
    agency, or contained in any settlement agreement entered into by the 
    debtor, arising from any act of fraud or defalcation while acting in 
    a fiduciary capacity committed with respect to any depository 
    institution or insured credit union;
        (12) for malicious or reckless failure to fulfill any commitment 
    by the debtor to a Federal depository institutions regulatory agency 
    to maintain the capital of an insured depository institution, except 
    that this paragraph shall not extend any such commitment which would 
    otherwise be terminated due to any act of such agency;
        (13) for any payment of an order of restitution issued under 
    title 18, United States Code;
        (14) incurred to pay a tax to the United States that would be 
    nondischargeable pursuant to paragraph (1);
        (15) not of the kind described in paragraph (5) that is incurred 
    by the debtor in the course of a divorce or separation or in 
    connection with a separation agreement, divorce decree or other 
    order of a court of record, a determination made in accordance with 
    State or territorial law by a governmental unit unless--
            (A) the debtor does not have the ability to pay such debt 
        from income or property of the debtor not reasonably necessary 
        to be expended for the maintenance or support of the debtor or a 
        dependent of the debtor and, if the debtor is engaged in a 
        business, for the payment of expenditures necessary for the 
        continuation, preservation, and operation of such business; or
            (B) discharging such debt would result in a benefit to the 
        debtor that outweighs the detrimental consequences to a spouse, 
        former spouse, or child of the debtor;

        (16) for a fee or assessment that becomes due and payable after 
    the order for relief to a membership association with respect to the 
    debtor's interest in a dwelling unit that has condominium ownership 
    or in a share of a cooperative housing corporation, but only if such 
    fee or assessment is payable for a period during which--
            (A) the debtor physically occupied a dwelling unit in the 
        condominium or cooperative project; or
            (B) the debtor rented the dwelling unit to a tenant and 
        received payments from the tenant for such period,

    but nothing in this paragraph shall except from discharge the debt 
    of a debtor for a membership association fee or assessment for a 
    period arising before entry of the order for relief in a pending or 
    subsequent bankruptcy case;
        (17) for a fee imposed by a court for the filing of a case, 
    motion, complaint, or appeal, or for other costs and expenses 
    assessed with respect to such filing, regardless of an assertion of 
    poverty by the debtor under section 1915(b) or (f) of title 28, or 
    the debtor's status as a prisoner, as defined in section 1915(h) of 
    title 28; or
        (18) owed under State law to a State or municipality that is--
            (A) in the nature of support, and
            (B) enforceable under part D of title IV of the Social 
        Security Act (42 U.S.C. 601 et seq.).

    (b) Notwithstanding subsection (a) of this section, a debt that was 
excepted from discharge under subsection (a)(1), (a)(3), or (a)(8) of 
this section, under section 17a(1), 17a(3), or 17a(5) of the Bankruptcy 
Act, under section 439A \1\ of the Higher Education Act of 1965, or 
under section 733(g) \1\ of the Public Health Service Act in a prior 
case concerning the debtor under this title, or under the Bankruptcy 
Act, is dischargeable in a case under this title unless, by the terms of 
subsection (a) of this section, such debt is not dischargeable in the 
case under this title.
---------------------------------------------------------------------------
    \1\ See References in Text note below.
---------------------------------------------------------------------------
    (c)(1) Except as provided in subsection (a)(3)(B) of this section, 
the debtor shall be discharged from a debt of a kind specified in 
paragraph (2), (4), (6), or (15) of subsection (a) of this section, 
unless, on request of the creditor to whom such debt is owed, and after 
notice and a hearing, the court determines such debt to be excepted from 
discharge under paragraph (2), (4), (6), or (15), as the case may be, of 
subsection (a) of this section.
    (2) Paragraph (1) shall not apply in the case of a Federal 
depository institutions regulatory agency seeking, in its capacity as 
conservator, receiver, or liquidating agent for an insured depository 
institution, to recover a debt described in subsection (a)(2), (a)(4), 
(a)(6), or (a)(11) owed to such institution by an institution-affiliated 
party unless the receiver, conservator, or liquidating agent was 
appointed in time to reasonably comply, or for a Federal depository 
institutions regulatory agency acting in its corporate capacity as a 
successor to such receiver, conservator, or liquidating agent to 
reasonably comply, with subsection (a)(3)(B) as a creditor of such 
institution-affiliated party with respect to such debt.
    (d) If a creditor requests a determination of dischargeability of a 
consumer debt under subsection (a)(2) of this section, and such debt is 
discharged, the court shall grant judgment in favor of the debtor for 
the costs of, and a reasonable attorney's fee for, the proceeding if the 
court finds that the position of the creditor was not substantially 
justified, except that the court shall not award such costs and fees if 
special circumstances would make the award unjust.
    (e) Any institution-affiliated party of a \2\ insured depository 
institution shall be considered to be acting in a fiduciary capacity 
with respect to the purposes of subsection (a)(4) or (11).
---------------------------------------------------------------------------
    \2\ So in original. Probably should be ``an''.
---------------------------------------------------------------------------

(Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2590; Pub. L. 96-56, Sec. 3, 
Aug. 14, 1979, 93 Stat. 387; Pub. L. 97-35, title XXIII, Sec. 2334(b), 
Aug. 13, 1981, 95 Stat. 863; Pub. L. 98-353, title III, Secs. 307, 371, 
454, July 10, 1984, 98 Stat. 353, 364, 375; Pub. L. 99-554, title II, 
Secs. 257(n), 281, 283(j), Oct. 27, 1986, 100 Stat. 3115-3117; Pub. L. 
101-581, Sec. 2(a), Nov. 15, 1990, 104 Stat. 2865; Pub. L. 101-647, 
title XXV, Sec. 2522(a), title XXXI, Sec. 3102(a), title XXXVI, 
Sec. 3621, Nov. 29, 1990, 104 Stat. 4865, 4916, 4964; Pub. L. 103-322, 
title XXXII, Sec. 320934, Sept. 13, 1994, 108 Stat. 2135; Pub. L. 103-
394, title II, Sec. 221, title III, Secs. 304(e), (h)(3), 306, 309, 
title V, Sec. 501(d)(13), Oct. 22, 1994, 108 Stat. 4129, 4133-4135, 
4137, 4145; Pub. L. 104-134, title I, Sec. 101[(a)] [title VIII, 
Sec. 804(b)], Apr. 26, 1996, 110 Stat. 1321, 1321-74; renumbered title 
I, Pub. L. 104-140, Sec. 1(a), May 2, 1996, 110 Stat. 1327; Pub. L. 104-
193, title III, Sec. 374(a), Aug. 22, 1996, 110 Stat. 2255; Pub. L. 105-
244, title IX, Sec. 971(a), Oct. 7, 1998, 112 Stat. 1837.)


                      Historical and Revision Notes

                         legislative statements

    Section 523(a)(1) represents a compromise between the position taken 
in the House bill and the Senate amendment. Section 523(a)(2) likewise 
represents a compromise between the position taken in the House bill and 
the Senate amendment with respect to the false financial statement 
exception to discharge. In order to clarify that a ``renewal of credit'' 
includes a ``refinancing of credit'', explicit reference to a 
refinancing of credit is made in the preamble to section 523(a)(2). A 
renewal of credit or refinancing of credit that was obtained by a false 
financial statement within the terms of section 523(a)(2) is 
nondischargeable. However, each of the provisions of section 523(a)(2) 
must be proved. Thus, under section 523(a)(2)(A) a creditor must prove 
that the debt was obtained by false pretenses, a false representation, 
or actual fraud, other than a statement respecting the debtor's or an 
insider's financial condition. Subparagraph (A) is intended to codify 
current case law e.g., Neal v. Clark, 95 U.S. 704 (1887) [24 L. Ed. 
586], which interprets ``fraud'' to mean actual or positive fraud rather 
than fraud implied in law. Subparagraph (A) is mutually exclusive from 
subparagraph (B). Subparagraph (B) pertains to the so-called false 
financial statement. In order for the debt to be nondischargeable, the 
creditor must prove that the debt was obtained by the use of a statement 
in writing (i) that is materially false; (ii) respecting the debtor's or 
an insider's financial condition; (iii) on which the creditor to whom 
the debtor is liable for obtaining money, property, services, or credit 
reasonably relied; (iv) that the debtor caused to be made or published 
with intent to deceive. Section 523(a)(2)(B)(iv) is not intended to 
change from present law since the statement that the debtor causes to be 
made or published with the intent to deceive automatically includes a 
statement that the debtor actually makes or publishes with an intent to 
deceive. Section 523(a)(2)(B) is explained in the House report. Under 
section 523(a)(2)(B)(i) a discharge is barred only as to that portion of 
a loan with respect to which a false financial statement is materially 
false.
    In many cases, a creditor is required by state law to refinance 
existing credit on which there has been no default. If the creditor does 
not forfeit remedies or otherwise rely to his detriment on a false 
financial statement with respect to existing credit, then an extension, 
renewal, or refinancing of such credit is nondischargeable only to the 
extent of the new money advanced; on the other hand, if an existing loan 
is in default or the creditor otherwise reasonably relies to his 
detriment on a false financial statement with regard to an existing 
loan, then the entire debt is nondischargeable under section 
523(a)(2)(B). This codifies the reasoning expressed by the second 
circuit in In re Danns, 558 F.2d 114 (2d Cir. 1977).
    Section 523(a)(3) of the House amendment is derived from the Senate 
amendment. The provision is intended to overrule Birkett v. Columbia 
Bank, 195 U.S. 345 (1904) [25 S.Ct. 38, 49 L.Ed. 231, 12 Am.Bankr.Rep. 
691].
    Section 523(a)(4) of the House amendment represents a compromise 
between the House bill and the Senate amendment.
    Section 523(a)(5) is a compromise between the House bill and the 
Senate amendment. The provision excepts from discharge a debt owed to a 
spouse, former spouse or child of the debtor, in connection with a 
separation agreement, divorce decree, or property settlement agreement, 
for alimony to, maintenance for, or support of such spouse or child but 
not to the extent that the debt is assigned to another entity. If the 
debtor has assumed an obligation of the debtor's spouse to a third party 
in connection with a separation agreement, property settlement 
agreement, or divorce proceeding, such debt is dischargeable to the 
extent that payment of the debt by the debtor is not actually in the 
nature of alimony, maintenance, or support of debtor's spouse, former 
spouse, or child.
    Section 523(a)(6) adopts the position taken in the House bill and 
rejects the alternative suggested in the Senate amendment. The phrase 
``willful and malicious injury'' covers a willful and malicious 
conversion.
    Section 523(a)(7) of the House amendment adopts the position taken 
in the Senate amendment and rejects the position taken in the House 
bill. A penalty relating to a tax cannot be nondischargeable unless the 
tax itself is nondischargeable.
    Section 523(a)(8) represents a compromise between the House bill and 
the Senate amendment regarding educational loans. This provision is 
broader than current law which is limited to federally insured loans. 
Only educational loans owing to a governmental unit or a nonprofit 
institution of higher education are made nondischargeable under this 
paragraph.
    Section 523(b) is new. The section represents a modification of 
similar provisions contained in the House bill and the Senate amendment.
    Section 523(c) of the House amendment adopts the position taken in 
the Senate amendment.
    Section 523(d) represents a compromise between the position taken in 
the House bill and the Senate amendment on the issue of attorneys' fees 
in false financial statement complaints to determine dischargeability. 
The provision contained in the House bill permitting the court to award 
damages is eliminated. The court must grant the debtor judgment or a 
reasonable attorneys' fee unless the granting of judgment would be 
clearly inequitable.
    Nondischargeable debts: The House amendment retains the basic 
categories of nondischargeable tax liabilities contained in both bills, 
but restricts the time limits on certain nondischargeable taxes. Under 
the amendment, nondischargeable taxes cover taxes entitled to priority 
under section 507(a)(6) of title 11 and, in the case of individual 
debtors under chapters 7, 11, or 13, tax liabilities with respect to 
which no required return had been filed or as to which a late return had 
been filed if the return became last due, including extensions, within 2 
years before the date of the petition or became due after the petition 
or as to which the debtor made a fraudulent return, entry or invoice or 
fraudulently attempted to evade or defeat the tax.
    In the case of individuals in liquidation under chapter 7 or in 
reorganization under chapter 11 of title 11, section 1141(d)(2) 
incorporates by reference the exceptions to discharge continued in 
section 523. Different rules concerning the discharge of taxes where a 
partnership or corporation reorganizes under chapter 11, apply under 
section 1141.
    The House amendment also deletes the reduction rule contained in 
section 523(e) of the Senate amendment. Under that rule, the amount of 
an otherwise nondischargeable tax liability would be reduced by the 
amount which a governmental tax authority could have collected from the 
debtor's estate if it had filed a timely claim against the estate but 
which it did not collect because no such claim was filed. This provision 
is deleted in order not to effectively compel a tax authority to file 
claim against the estate in ``no asset'' cases, along with a 
dischargeability petition. In no-asset cases, therefore, if the tax 
authority is not potentially penalized by failing to file a claim, the 
debtor in such cases will have a better opportunity to choose the 
prepayment forum, bankruptcy court or the Tax Court, in which to 
litigate his personal liability for a nondischargeable tax.
    The House amendment also adopts the Senate amendment provision 
limiting the nondischargeability of punitive tax penalties, that is, 
penalties other than those which represent collection of a principal 
amount of tax liability through the form of a ``penalty.'' Under the 
House amendment, tax penalties which are basically punitive in nature 
are to be nondischargeable only if the penalty is computed by reference 
to a related tax liability which is nondischargeable or, if the amount 
of the penalty is not computed by reference to a tax liability, the 
transaction or event giving rise to the penalty occurred during the 3-
year period ending on the date of the petition.


                        senate report no. 95-989

    This section specifies which of the debtor's debts are not 
discharged in a bankruptcy case, and certain procedures for effectuating 
the section. The provision in Bankruptcy Act Sec. 17c [section 35(c) of 
former title 11] granting the bankruptcy courts jurisdiction to 
determine dischargeability is deleted as unnecessary, in view of the 
comprehensive grant of jurisdiction prescribed in proposed 28 U.S.C. 
1334(b), which is adequate to cover the full jurisdiction that the 
bankruptcy courts have today over dischargeability and related issues 
under Bankruptcy Act Sec. 17c. The Rules of Bankruptcy Procedure will 
specify, as they do today, who may request determinations of 
dischargeability, subject, of course, to proposed 11 U.S.C. 523(c), and 
when such a request may be made. Proposed 11 U.S.C. 350, providing for 
reopening of cases, provides one possible procedure for a determination 
of dischargeability and related issues after a case is closed.
    Subsection (a) lists nine kinds of debts excepted from discharge. 
Taxes that are excepted from discharge are set forth in paragraph (1). 
These include claims against the debtor which receive priority in the 
second, third and sixth categories (Sec. 507(a)(3)(B) and (c) and (6)). 
These categories include taxes for which the tax authority failed to 
file a claim against the estate or filed its claim late. Whether or not 
the taxing authority's claim is secured will also not affect the claim's 
nondischargeability if the tax liability in question is otherwise 
entitled to priority.
    Also included in the nondischargeable debts are taxes for which the 
debtor had not filed a required return as of the petition date, or for 
which a return had been filed beyond its last permitted due date 
(Sec. 523(a)(1)(B)). For this purpose, the date of the tax year to which 
the return relates is immaterial. The late return rule applies, however, 
only to the late returns filed within three years before the petition 
was filed, and to late returns filed after the petition in title 11 was 
filed. For this purpose, the taxable year in question need not be one or 
more of the three years immediately preceding the filing of the 
petition.
    Tax claims with respect to which the debtor filed a fraudulent 
return, entry or invoice, or fraudulently attempted to evade or defeat 
any tax (Sec. 523(a)(1)(C)) are included. The date of the taxable year 
with regard to which the fraud occurred is immaterial.
    Also included are tax payments due under an agreement for deferred 
payment of taxes, which a debtor had entered into with the Internal 
Revenue Service (or State or local tax authority) before the filing of 
the petition and which relate to a prepetition tax liability 
(Sec. 523(a)(1)(D)) are also nondischargeable. This classification 
applies only to tax claims which would have received priority under 
section 507(a) if the taxpayer had filed a title 11 petition on the date 
on which the deferred payment agreement was entered into. This rule also 
applies only to installment payments which become due during and after 
the commencement of the title 11 case. Payments which had become due 
within one year before the filing of the petition receive sixth 
priority, and will be nondischargeable under the general rule of section 
523(a)(1)(A).
    The above categories of nondischargeability apply to customs duties 
as well as to taxes.
    Paragraph (2) provides that as under Bankruptcy Act Sec. 17a(2) 
[section 35(a)(2) of former title 11], a debt for obtaining money, 
property, services, or a refinancing extension or renewal of credit by 
false pretenses, a false representation, or actual fraud, or by use of a 
statement in writing respecting the debtor's financial condition that is 
materially false, on which the creditor reasonably relied, and which the 
debtor made or published with intent to deceive, is excepted from 
discharge. This provision is modified only slightly from current section 
17a(2). First, ``actual fraud'' is added as a ground for exception from 
discharge. Second, the creditor must not only have relied on a false 
statement in writing, but the reliance must have been reasonable. This 
codifies case law construing present section 17a(2). Third, the phrase 
``in any manner whatsoever'' that appears in current law after ``made or 
published'' is deleted as unnecessary, the word ``published'' is used in 
the same sense that it is used in defamation cases.
    Unscheduled debts are excepted from discharge under paragraph (3). 
The provision, derived from section 17a(3) [section 35(a)(3) of former 
title 11], follows current law, but clarifies some uncertainties 
generated by the case law construing 17a(3). The debt is excepted from 
discharge if it was not scheduled in time to permit timely action by the 
creditor to protect his rights, unless the creditor had notice or actual 
knowledge of the case.
    Paragraph (4) excepts debts for fraud incurred by the debtor while 
acting in a fiduciary capacity or for defalcation, embezzlement, or 
misappropriation.
    Paragraph (5) provides that debts for willful and malicious 
conversion or injury by the debtor to another entity or the property of 
another entity are nondischargeable. Under this paragraph ``willful'' 
means deliberate or intentional. To the extent that Tinker v. Colwell, 
139 U.S. 473 (1902), held that a less strict standard is intended, and 
to the extent that other cases have relied on Tinker to apply a 
``reckless disregard'' standard, they are overruled.
    Paragraph (6) excepts from discharge debts to a spouse, former 
spouse, or child of the debtor for alimony to, maintenance for, or 
support of the spouse or child. This language, in combination with the 
repeal of section 456(b) of the Social Security Act (42 U.S.C. 656(b)) 
by section 326 of the bill, will apply to make nondischargeable only 
alimony, maintenance, or support owed directly to a spouse or dependent. 
What constitutes alimony, maintenance, or support, will be determined 
under the bankruptcy law, not State law. Thus, cases such as In re 
Waller, 494 F.2d 447 (6th Cir. 1974), are overruled, and the result in 
cases such as Fife v. Fife, 1 Utah 2d 281, 265 P.2d 642 (1952) is 
followed. The proviso, however, makes nondischargeable any debts 
resulting from an agreement by the debtor to hold the debtor's spouse 
harmless on joint debts, to the extent that the agreement is in payment 
of alimony, maintenance, or support of the spouse, as determined under 
bankruptcy law considerations as to whether a particular agreement to 
pay money to a spouse is actually alimony or a property settlement.
    Paragraph (7) makes nondischargeable certain liabilities for 
penalties including tax penalties if the underlying tax with respect to 
which the penalty was imposed is also nondischargeable (sec. 523(a)(7)). 
These latter liabilities cover those which, but are penal in nature, as 
distinct from so-called ``pecuniary loss'' penalties which, in the case 
of taxes, involve basically the collection of a tax under the label of a 
``penalty.'' This provision differs from the bill as introduced, which 
did not link the nondischarge of a tax penalty with the treatment of the 
underlying tax. The amended provision reflects the existing position of 
the Internal Revenue Service as to tax penalties imposed by the Internal 
Revenue Code (Rev.Rul. 68-574, 1968-2 C.B. 595).
    Paragraph (8) follows generally current law and excerpts from 
discharge student loans until such loans have been due and owing for 
five years. Such loans include direct student loans as well as insured 
and guaranteed loans. This provision is intended to be self-executing 
and the lender or institution is not required to file a complaint to 
determine the nondischargeability of any student loan.
    Paragraph (9) excepts from discharge debts that the debtor owed 
before a previous bankruptcy case concerning the debtor in which the 
debtor was denied a discharge other than on the basis of the six-year 
bar.
    Subsection (b) of this section permits discharge in a bankruptcy 
case of an unscheduled debt from a prior case. This provision is carried 
over from Bankruptcy Act Sec. 17b [section 35(b) of former title 11]. 
The result dictated by the subsection would probably not be different if 

the subsection were not included. It is included nevertheless for 
clarity.
    Subsection (c) requires a creditor who is owed a debt that may be 
excepted from discharge under paragraph (2), (4), or (5), (false 
statements, defalcation or larceny misappropriation, or willful and 
malicious injury) to initiate proceedings in the bankruptcy court for an 
exception to discharge. If the creditor does not act, the debt is 
discharged. This provision does not change current law.
    Subsection (d) is new. It provides protection to a consumer debtor 
that dealt honestly with a creditor who sought to have a debt excepted 
from discharge on the ground of falsity in the incurring of the debt. 
The debtor may be awarded costs and a reasonable attorney's fee for the 
proceeding to determine the dischargeability of a debt under subsection 
(a)(2), if the court finds that the proceeding was frivolous or not 
brought by its creditor in good faith.
    The purpose of the provision is to discourage creditors from 
initiating proceedings to obtaining a false financial statement 
exception to discharge in the hope of obtaining a settlement from an 
honest debtor anxious to save attorney's fees. Such practices impair the 
debtor's fresh start and are contrary to the spirit of the bankruptcy 
laws.


                         house report no. 95-595

    Subsection (a) lists eight kinds of debts excepted from discharge. 
Taxes that are entitled to priority are excepted from discharge under 
paragraph (1). In addition, taxes with respect to which the debtor made 
a fraudulent return or willfully attempted to evade or defeat, or with 
respect to which a return (if required) was not filed or was not filed 
after the due date and after one year before the bankruptcy case are 
excepted from discharge. If the taxing authority's claim has been 
disallowed, then it would be barred by the more modern rules of 
collateral estoppel from reasserting that claim against the debtor after 
the case was closed. See Plumb, The Tax Recommendations of the 
Commission on the Bankruptcy Laws: Tax Procedures, 88 Harv.L.Rev. 1360, 
1388 (1975).
    As under Bankruptcy Act Sec. 17a(2) [section 35(a)(2) of former 
title 11], debt for obtaining money, property, services, or an extension 
or renewal of credit by false pretenses, a false representation, or 
actual fraud, or by use of a statement in writing respecting the 
debtor's financial condition that is materially false, on which the 
creditor reasonably relied, and that the debtor made or published with 
intent to deceive, is excepted from discharge. This provision is 
modified only slightly from current section 17a(2). First, ``actual 
fraud'' is added as a grounds for exception from discharge. Second, the 
creditor must not only have relied on a false statement in writing, the 
reliance must have been reasonable. This codifies case law construing 
this provision. Third, the phrase ``in any manner whatsoever'' that 
appears in current law after ``made or published'' is deleted as 
unnecessary. The word ``published'' is used in the same sense that it is 
used in slander actions.
    Unscheduled debts are excepted from discharge under paragraph (3). 
The provision, derived from section 17a(3) [section 35(a)(3) of former 
title 11], follows current law, but clarifies some uncertainties 
generated by the case law construing 17a(3). The debt is excepted from 
discharge if it was not scheduled in time to permit timely action by the 
creditor to protect his rights, unless the creditor had notice or actual 
knowledge of the case.
    Paragraph (4) excepts debts for embezzlement or larceny. The 
deletion of willful and malicious conversion from Sec. 17a(2) of the 
Bankruptcy Act [section 35(a)(2) of former title 11] is not intended to 
effect a substantive change. The intent is to include in the category of 
non-dischargeable debts a conversion under which the debtor willfully 
and maliciously intends to borrow property for a short period of time 
with no intent to inflict injury but on which injury is in fact 
inflicted.
    Paragraph (5) excepts from discharge debts to a spouse, former 
spouse, or child of the debtor for alimony to, maintenance for, or 
support of, the spouse or child. This language, in combination with the 
repeal of section 456(b) of the Social Security Act (42 U.S.C. 656(b)) 
by section 327 of the bill, will apply to make nondischargeable only 
alimony, maintenance, or support owed directly to a spouse or dependent. 
See Hearings, pt. 2, at 942. What constitutes alimony, maintenance, or 
support, will be determined under the bankruptcy laws, not State law. 
Thus, cases such as In re Waller, 494 F.2d 447 (6th Cir. 1974); 
Hearings, pt. 3, at 1308-10, are overruled, and the result in cases such 
as Fife v. Fife, 1 Utah 2d 281, 265 P.2d 642 (1952) is followed. This 
provision will, however, make nondischargeable any debts resulting from 
an agreement by the debtor to hold the debtor's spouse harmless on joint 
debts, to the extent that the agreement is in payment of alimony, 
maintenance, or support of the spouse, as determined under bankruptcy 
law considerations that are similar to considerations of whether a 
particular agreement to pay money to a spouse is actually alimony or a 
property settlement. See Hearings, pt. 3, at 1287-1290.
    Paragraph (6) excepts debts for willful and malicious injury by the 
debtor to another person or to the property of another person. Under 
this paragraph, ``willful'' means deliberate or intentional. To the 
extent that Tinker v. Colwell, 193 U.S. 473 (1902) [24 S.Ct. 505, 48 
L.Ed. 754, 11 Am.Bankr.Rep. 568], held that a looser standard is 
intended, and to the extent that other cases have relied on Tinker to 
apply a ``reckless disregard'' standard, they are overruled.
    Paragraph (7) excepts from discharge a debt for a fine, penalty, or 
forfeiture payable to and for the benefit of a governmental unit, that 
is not compensation for actual pecuniary loss.
    Paragraph (8) [enacted as (9)] excepts from discharge debts that the 
debtor owed before a previous bankruptcy case concerning the debtor in 
which the debtor was denied a discharge other than on the basis of the 
six-year bar.
    Subsection (d) is new. It provides protection to a consumer debtor 
that dealt honestly with a creditor who sought to have a debt excepted 
from discharge on grounds of falsity in the incurring of the debt. The 
debtor is entitled to costs of and a reasonable attorney's fee for the 
proceeding to determine the dischargeability of a debt under subsection 
(a)(2), if the creditor initiated the proceeding and the debt was 
determined to be dischargeable. The court is permitted to award any 
actual pecuniary loss that the debtor may have suffered as a result of 
the proceeding (such as loss of a day's pay). The purpose of the 
provision is to discourage creditors from initiating false financial 
statement exception to discharge actions in the hopes of obtaining a 
settlement from an honest debtor anxious to save attorney's fees. Such 
practices impair the debtor's fresh start.

                       References in Text

    The Consumer Credit Protection Act, referred to in subsec. 
(a)(2)(C), is Pub. L. 90-321, May 29, 1968, 82 Stat. 146, as amended, 
which is classified principally to chapter 41 (Sec. 1601 et seq.) of 
Title 15, Commerce and Trade. For complete classification of this Act to 
the Code, see Short Title note set out under section 1601 of Title 15 
and Tables.
    The Bankruptcy Act, referred to in subsecs. (a)(10) and (b), is act 
July 1, 1898, ch. 541, 30 Stat. 544, as amended, which was classified 
generally to former Title 11. Sections 14c and 17a of the Bankruptcy Act 
were classified to sections 32(c) and 35(a) of former Title 11.
    The Social Security Act, referred to in subsec. (a)(18)(B), is act 
Aug. 14, 1935, ch. 531, 49 Stat. 620, as amended. Part D of title IV of 
the Act is classified generally to part D (Sec. 651 et seq.) of 
subchapter IV of chapter 7 of Title 42, The Public Health and Welfare. 
Section 408(a)(3) of the Act is classified to section 608(a)(3) of Title 
42. For complete classification of this Act to the Code, see section 
1305 of Title 42 and Tables.
    Section 439A of the Higher Education Act of 1965, referred to in 
subsec. (b), was classified to section 1087-3 of Title 20, Education, 
and was repealed by Pub. L. 95-598, title III, Sec. 317, Nov. 6, 1978, 
92 Stat. 2678.
    Section 733(g) of the Public Health Service Act, referred to in 
subsec. (b), was repealed by Pub. L. 95-598, title III, Sec. 327, Nov. 
6, 1978, 92 Stat. 2679. A subsec. (g), containing similar provisions, 
was added to section 733 by Pub. L. 97-35, title XXVII, Sec. 2730, Aug. 
13, 1981, 95 Stat. 919. Section 733 was subsequently omitted in the 
general revision of subchapter V of chapter 6A of Title 42, The Public 
Health and Welfare, by Pub. L. 102-408, title I, Sec. 102, Oct. 13, 
1992, 106 Stat. 1994. See section 292f(g) of Title 42.


                               Amendments

    1998--Subsec. (a)(8). Pub. L. 105-244 substituted ``stipend, 
unless'' for ``stipend, unless--'' and struck out ``(B)'' before 
``excepting such debt'' and subpar. (A) which read as follows: ``such 
loan, benefit, scholarship, or stipend overpayment first became due more 
than 7 years (exclusive of any applicable suspension of the repayment 
period) before the date of the filing of the petition; or''.
    1996--Subsec. (a)(5)(A). Pub. L. 104-193, Sec. 374(a)(4), 
substituted ``section 408(a)(3)'' for ``section 402(a)(26)''.
    Subsec. (a)(17). Pub. L. 104-134 added par. (17).
    Subsec. (a)(18). Pub. L. 104-193, Sec. 374(a)(1)-(3), added par. 
(18).
    1994--Subsec. (a). Pub. L. 103-394, Sec. 501(d)(13)(A)(i), 
substituted ``1141,'' for ``1141,,'' in introductory provisions.
    Subsec. (a)(1)(A). Pub. L. 103-394, Sec. 304(h)(3), substituted 
``507(a)(8)'' for ``507(a)(7)''.
    Subsec. (a)(2)(C). Pub. L. 103-394, Secs. 306, 501(d)(13)(A)(ii), 
substituted ``$1,000 for'' for ``$500 for'', ``60'' for ``forty'' after 
``incurred by an individual debtor on or within'', and ``60'' for 
``twenty'' after ``obtained by an individual debtor on or within'', and 
struck out ``(15 U.S.C. 1601 et seq.)'' after ``Protection Act''.
    Subsec. (a)(11). Pub. L. 103-322, Sec. 320934(1), struck out ``or'' 
after semicolon at end.
    Subsec. (a)(12). Pub. L. 103-322, Sec. 320934(2), which directed the 
substitution of ``; or'' for a period at end of par. (12), could not be 
executed because a period did not appear at end.
    Subsec. (a)(13). Pub. L. 103-394, Sec. 221(1), substituted semicolon 
for period at end.
    Pub. L. 103-322, Sec. 320934(3), added par. (13).

    Subsec. (a)(14). Pub. L. 103-394, Sec. 221(2), added par. (14).
    Subsec. (a)(15). Pub. L. 103-394, Sec. 304(e)[(1)], which directed 
the amendment of this section by adding par. (15) ``at the end'' was 
executed by adding par. (15) at the end of subsec. (a) to reflect the 
probable intent of Congress.
    Subsec. (a)(16). Pub. L. 103-394, Sec. 309, added par. (16).
    Subsec. (b). Pub. L. 103-394, Sec. 501(d)(13)(B), struck out ``(20 
U.S.C. 1087-3)'' after ``Act of 1965'' and ``(42 U.S.C. 294f)'' after 
``Service Act''.
    Subsec. (c)(1). Pub. L. 103-394, Sec. 304(e)(2), substituted ``(6), 
or (15)'' for ``or (6)'' in two places.
    Subsec. (e). Pub. L. 103-394, Sec. 501(d)(13)(C), substituted 
``insured depository institution'' for ``depository institution or 
insured credit union''.
    1990--Subsec. (a)(8). Pub. L. 101-647, Sec. 3621, substituted ``for 
an educational benefit overpayment or loan made, insured or guaranteed 
by a governmental unit, or made under any program funded in whole or in 
part by a governmental unit or nonprofit institution, or for an 
obligation to repay funds received as an educational benefit, 
scholarship or stipend, unless'' for ``for an educational loan made, 
insured, or guaranteed by a governmental unit, or made under any program 
funded in whole or in part by a governmental unit or a nonprofit 
institution, unless'' in introductory provisions and amended subpar. (A) 
generally. Prior to amendment, subpar. (A) read as follows: ``such loan 
first became due before five years (exclusive of any applicable 
suspension of the repayment period) before the date of the filing of the 
petition; or''.
    Subsec. (a)(9). Pub. L. 101-581 and Pub. L. 101-647, Sec. 3102(a), 
identically amended par. (9) generally. Prior to amendment, par. (9) 
read as follows: ``to any entity, to the extent that such debt arises 
from a judgment or consent decree entered in a court of record against 
the debtor wherein liability was incurred by such debtor as a result of 
the debtor's operation of a motor vehicle while legally intoxicated 
under the laws or regulations of any jurisdiction within the United 
States or its territories wherein such motor vehicle was operated and 
within which such liability was incurred; or''.
    Subsec. (a)(11), (12). Pub. L. 101-647, Sec. 2522(a)(1), added pars. 
(11) and (12).
    Subsec. (c). Pub. L. 101-647, Sec. 2522(a)(3), designated existing 
provisions as par. (1) and added par. (2).
    Subsec. (e). Pub. L. 101-647, Sec. 2522(a)(2), added subsec. (e).
    1986--Subsec. (a). Pub. L. 99-554, Sec. 257(n), inserted reference 
to sections 1228(a) and 1228(b) of this title.
    Subsec. (a)(1)(A). Pub. L. 99-554, Sec. 283(j)(1)(A), substituted 
``507(a)(7)'' for ``507(a)(6)''.
    Subsec. (a)(5). Pub. L. 99-554, Sec. 281, struck out the comma after 
``decree'' and inserted ``, determination made in accordance with State 
or territorial law by a governmental unit,'' after ``record''.
    Subsec. (a)(9), (10). Pub. L. 99-554, Sec. 283(j)(1)(B), 
redesignated par. (9) relating to debts incurred by persons driving 
while intoxicated, added by Pub. L. 98-353, as (10).
    Subsec. (b). Pub. L. 99-554, Sec. 283(j)(2), substituted ``Service'' 
for ``Services''.
    1984--Subsec. (a)(2). Pub. L. 98-353, Sec. 454(a)(1), in provisions 
preceding subpar. (A), struck out ``obtaining'' after ``for'', and 
substituted ``refinancing of credit, to the extent obtained'' for 
``refinance of credit,''.
    Subsec. (a)(2)(A). Pub. L. 98-353, Sec. 307(a)(1), struck out ``or'' 
at end.
    Subsec. (a)(2)(B). Pub. L. 98-353, Sec. 307(a)(2), inserted ``or'' 
at end.
    Subsec. (a)(2)(B)(iii). Pub. L. 98-353, Sec. 454(a)(1)(A), struck 
out ``obtaining'' before ``such''.
    Subsec. (a)(2)(C). Pub. L. 98-353, Sec. 307(a)(3), added subpar. 
(C).
    Subsec. (a)(5). Pub. L. 98-353, Sec. 454(b)(1), inserted ``or other 
order of a court of record'' after ``divorce decree,'' in provisions 
preceding subpar. (A).
    Subsec. (a)(5)(A). Pub. L. 98-353, Sec. 454(b)(2), inserted ``, or 
any such debt which has been assigned to the Federal Government or to a 
State or any political subdivision of such State''.
    Subsec. (a)(8). Pub. L. 98-353, Secs. 371(1), 454(a)(2), struck out 
``of higher education'' after ``a nonprofit institution of'' and struck 
out ``or'' at end.
    Subsec. (a)(9). Pub. L. 98-353, Sec. 371(2), added the par. (9) 
relating to debts incurred by persons driving while intoxicated.
    Subsec. (c). Pub. L. 98-353, Sec. 454(c), inserted ``of a kind'' 
after ``debt''.
    Subsec. (d). Pub. L. 98-353, Sec. 307(b), substituted ``the court 
shall grant judgment in favor of the debtor for the costs of, and a 
reasonable attorney's fee for, the proceeding if the court finds that 
the position of the creditor was not substantially justified, except 
that the court shall not award such costs and fees if special 
circumstances would make the award unjust'' for ``the court shall grant 
judgment against such creditor and in favor of the debtor for the costs 
of, and a reasonable attorney's fee for, the proceeding to determine 
dischargeability, unless such granting of judgment would be clearly 
inequitable''.
    1981--Subsec. (a)(5)(A). Pub. L. 97-35 substituted ``law, or 
otherwise (other than debts assigned pursuant to section 402(a)(26) of 
the Social Security Act);'' for ``law, or otherwise;''.
    1979--Subsec. (a)(8). Pub. L. 96-56 substituted ``for an educational 
loan made, insured, or guaranteed by a governmental unit, or made under 
any program funded in whole or in part by a governmental unit or a 
nonprofit institution of higher education'' for ``to a governmental 
unit, or a nonprofit institution of higher education, for an educational 
loan'' in the provisions preceding subpar. (A) and inserted ``(exclusive 
of any applicable suspension of the repayment period)'' after ``before 
five years'' in subpar. (A).


                    Effective Date of 1998 Amendment

    Pub. L. 105-244, title IX, Sec. 971(b), Oct. 7, 1998, 112 Stat. 
1837, provided that: ``The amendment made by subsection (a) [amending 
this section] shall apply only with respect to cases commenced under 
title 11, United States Code, after the date of enactment of this Act 
[Oct. 7, 1998].''


                    Effective Date of 1996 Amendment

    Section 374(c) of Pub. L. 104-193 provided that: ``The amendments 
made by this section [amending this section and section 656 of Title 42, 
The Public Health and Welfare] shall apply only with respect to cases 
commenced under title 11 of the United States Code after the date of the 
enactment of this Act [Aug. 22, 1996].''
    For provisions relating to effective date of title III of Pub. L. 
104-193, see section 395(a)-(c) of Pub. L. 104-193, set out as a note 
under section 654 of Title 42, The Public Health and Welfare.


                    Effective Date of 1994 Amendment

    Amendment by Pub. L. 103-394 effective Oct. 22, 1994, and not 
applicable with respect to cases commenced under this title before Oct. 
22, 1994, see section 702 of Pub. L. 103-394, set out as a note under 
section 101 of this title.


                    Effective Date of 1990 Amendments

    Section 3104 of title XXXI of Pub. L. 101-647 provided that:
    ``(a) Effective Date.--This title and the amendments made by this 
title [amending this section and section 1328 of this title and enacting 
provisions set out as a note under section 101 of this title] shall take 
effect on the date of the enactment of this Act [Nov. 29, 1990].
    ``(b) Application of Amendments.--The amendments made by this title 
[amending this section and section 1328 of this title] shall not apply 
with respect to cases commenced under title 11 of the United States Code 
before the date of the enactment of this Act.''
    Amendment by section 3621 of Pub. L. 101-647 effective 180 days 
after Nov. 29, 1990, see section 3631 of Pub. L. 101-647, set out as an 
Effective Date note under section 3001 of Title 28, Judiciary and 
Judicial Procedure.
    Section 4 of Pub. L. 101-581 provided that:
    ``(a) Effective Date.--This Act and the amendments made by this Act 
[amending this section and section 1328 of this title and enacting 
provisions set out as a note under section 101 of this title] shall take 
effect on the date of the enactment of this Act [Nov. 15, 1990].
    ``(b) Application of Amendments.--The amendments made by this Act 
[amending this section and section 1328 of this title] shall not apply 
with respect to cases commenced under title 11 of the United States Code 
before the date of the enactment of this Act.''


                    Effective Date of 1986 Amendment

    Amendment by section 257 of Pub. L. 99-554 effective 30 days after 
Oct. 27, 1986, but not applicable to cases commenced under this title 
before that date, see section 302(a), (c)(1) of Pub. L. 99-554, set out 
as a note under section 581 of Title 28, Judiciary and Judicial 
Procedure.
    Amendment by sections 281 and 283 of Pub. L. 99-554 effective 30 
days after Oct. 27, 1986, see section 302(a) of Pub. L. 99-554.


                    Effective Date of 1984 Amendment

    Amendment by Pub. L. 98-353 effective with respect to cases filed 90 
days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out 
as a note under section 101 of this title.


                    Effective Date of 1981 Amendment

    Amendment by Pub. L. 97-35 effective Aug. 13, 1981, see section 
2334(c) of Pub. L. 97-35, set out as a note under section 656 of Title 
42, The Public Health and Welfare.


                      Adjustment of Dollar Amounts

    For adjustment of dollar amounts specified in subsec. (a)(2)(C) of 
this section by the Judicial Conference of the United States, effective 
Apr. 1, 1998, see note set out under section 104 of this title.

                  Section Referred to in Other Sections

    This section is referred to in sections 101, 104, 106, 502, 507, 
522, 524, 727, 1141, 1228, 1328 of this title; title 20 section 1087; 
title 26 sections 6327, 7437.