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Are Sanctions Awarded by State Court Dischargeable in California?

    Sanctions and BankruptcySanctions and fee awards in state court are dischargeable if the underlying statue or law for which the sanction was applied violates Section 523 of the Bankruptcy Code.

    As stated above, the 9th Circuit in Kaplan v. Wasko, Case No. CC-12-1118-PaMkBe (9th Cir. B.A.P. Mar. 6, 2013) (unpublished) came to the conclusion that sanctions are dischargeable only if the statute at issue or the underlying conduct violates one of the provisions outlined in Section 523 of the Bankruptcy Code.

    In this case sanctions were awarded in a state court proceeding due to violations during the discovery process.  The lower court held that the sanctions were dischargeable.  However, on appeal the Ninth Circuit BAP clarified that the fee award could be discharged if the underlying statute detailed conduct that violates Section 523.

    This means that some sanctions might be dischargeable, while others are not.  For example, in a divorce proceeding, a court might sanction a party and include it as a spousal or child support obligation.  This will not be dischargeable under Section 523 of the Bankruptcy Code.