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Treble Damages for Fraud Not Dischargable in Bankruptcy
Description Landlord, convicted of fraud in overcharging tenants, is not allowed to discharge the rent overcharges or the treble damages and attorney's fees the tenants won under New Jersey Consumer Fraud Act. Supreme Court noted that the Bankruptcy Code affords relief only to the "honest but unfortunate debtor."
Topic Bankruptcy
Key Words Discharge, Fraud
C A S E   S U M M A R Y
Facts Landlord found to have been charging higher rent than allowed by Hoboken, New Jersey, rent control ordinance and was ordered to refund tenants over $31,000 in rent. He filed for bankruptcy under Chapter 7, seeking to discharge his debts. Tenants sued landlord. Bankruptcy court found that he had committed fraud and an "unconscionable commercial practice" under New Jersey law and awarded the tenants treble damages plus attorney's fees. Appeals court affirmed. Landlord appealed, claiming the that debt should be discharged.
Court of Appeals Decision Affirmed. The Bankruptcy Code prohibits debtors from discharging liabilities incurred on account of fraud. Since the landlord's actions were found to be fraudulent, the rent, treble damages and attorney's fees may not be discharged in bankruptcy.
Citation Cohen v. De La Cruz, 118 S.Ct. 1212 (1998)

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