Partnership That Never Existed Cannot Create Nondischargeable Debt

January 16, 2015 In Utnehmer v. Crull (In re Utnehmer), 2013 Bankr. LEXIS 4482, NC-12-1362-PaDJu (9th Cir. BAP Oct. 10, 2013), the Bankruptcy Appellate Panel of the United States Court of Appeals for the Ninth Circuit (“BAP”) ruled that Bankrupcty Code Section 523(a)(4) did not apply to render a debt nondischargeable in relation to a partnership that was never formed. Specifically, an agreement to re-characterize debt as profit-sharing equity was conditional upon events that did not occur. Read more below.

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