On March 27, in CUMIS Insurance Society v. Sammons (In re Sammons), No. N12-00514-GS, 2014 Bankr. LEXIS 1413 (Bankr. D. Alaska, Mar. 27, 2014), the U.S. Bankruptcy Court for the District of Alaska considered whether a Chapter 7 debtor could discharge a debt stemming from his nondebtor wife’s embezzlement of approximately $1 million from her employer. The court engaged in a highly fact-specific analysis, and concluded that the debtor could not be found liable for his wife’s wrongdoing where there was insufficient evidence to establish the debtor’s knowledge of the embezzlement. Consequently, the court held that the debtor in this case owed no debt on account of his wife’s wrongdoing, and thus the question of dischargeability was rendered moot.
Facts
Steven Sammons was a public-school administrator who originally lived with his family in Montana. After accepting a new position, Sammons began spending most of the school year in a school district in Alaska. His family remained in Montana, and he typically returned to Montana for winter, spring and summer breaks. While working in Alaska, Sammons’ meals were included in his compensation, and the cost of rent was deducted from his salary, thereby reducing his need to access cash. His wife handled all the family’s finances, including paying bills and preparing tax returns, and Sammons did not review bank statements. Sammons testified that he also operated a seasonal painting business in Montana during the summer months, but did not know how much the business generated, given his wife’s handling of all of the family’s finances. During the several years leading to his bankruptcy filing, Sammons and his family purchased snowmobiles, ATVs, jet skis and a rental property.
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