Lariat Companies, Inc. v. Wigley (In re Wigley), 951 F.3d 967 (8th Cir. 3/9/20)
The Eighth Circuit Court of Appeals reversed the Eighth Circuit Bankruptcy Appellate Panel. The 8th Circuit held that husband’s discharge of a Minnesota state court Judgment for fraudulent transfer, against husband and wife, did not extinguish the wife’s joint and several liability for a fraudulent transfer judgment against the husband and wife. Though husband had discharged husband’s liability on the state court judgment, creditor Lariat still held a claim against wife (Mrs. Wigley) based on Bankruptcy Code 11 USC §524(e), which provides that “discharge of a debt of the debtor does not affect the liability of any other entity on, or the property of any other entity for, such debt.”. The Eighth Circuit held that, while Mr. Wigley’s discharge extinguished Mr. Wrigley’s personal liability under the fraudulent transfer judgment, Mrs. Wigley remained liable for that debt. Note that Mr. and Mrs. Wrigley were Minnesota residents, the fraudulent transfer state court Judgment was a Minnesota state court Judgment, and the Wigleys’ “his and her” chapter 11 cases were filed in Bankruptcy Court, District of Minnesota. Minnesota is not a community property state. If Mr. and Mrs. Wrigley had been California residents, and the Judgment had been a California state court Judgment, the outcome may have been different because of the community discharge in 11 USC §524(a)(3).