May 2016

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On May 16, the bankruptcy world of “actual fraud” got larger. In an opinion delivered by Justice Sotomayor, the Supreme Court addressed what it recognized was a deepening circuit split regarding the interpretation of “actual fraud” in 11 U.S.C. ยง 523(a)(2)(A). After analyzing the history and structure of the code section, the Court rejected a narrower interpretation of the statute requiring that the debt be procured by a false representation at the time of inducement and clarified that “actual fraud” included traditional forms of fraud, such as a fraudulent transfer or similar wrongdoing.