The Supreme Court unanimously solution A woman can’t use protection under the U.S. bankruptcy code to avoid paying a debt she incurred as a result of her partner’s fraud, a court ruled Wednesday.

Court said that the woman Kate Bartenwerferhad a debt even if she did not know or could not have known about her partner’s debt fraud in connection with the sale of the house they were renovating.

A 9-0 ruling written by Justice Amy Connie Barrett highlighted a Supreme Court decision in 1885 which held that two partners in a New York wool company are liable for the debt due to the fraudulent claims of a third party, even though they themselves were not “at fault”.

Barrett rejected Bartenweffer’s grammatically oriented argument that the relevant section of the bankruptcy code, written in the passive voice as “money obtained by fraud,” refers to “money obtained by fraud of an individual debtor.”

“Innocent people are sometimes prosecuted for fraud that they did not personally commit, and when they de-
claire bankruptcy, [the bankruptcy code] prohibits repayment of that debt,” Barrett wrote.

“Same goes for Bartenwerfer and we are sensitive to the difficulties she is facing,” she wrote.

Justice Sonia Sotomayor, in a concurring opinion joined by Justice Ketanji Brown Jackson, noted that the ruling addressed people who acted together in a partnership, not “a situation involving fraud by a person who has no agency or partnership with debtor”.

“With that understanding, I join the court’s opinion,” Sotomayor wrote.

The decision in the Bartenweffer case came 18 years after the events that sparked the controversy.

Bartenweffer and her then-boyfriend, David Bartenweffer, bought a San Francisco home together in 2005 and planned to remodel it and sell it for a profit, the ruling said.

While David hired an architect, engineer, and general contractor, supervised their progress, and paid for the work, “Kate, on the other hand, was largely uninvolved,” Barrett wrote.

The house was eventually bought by a man named Kieran Buckley after the Bartenwerfers “testified that
they disclosed all material facts regarding the property,” Barrett noted.

But Buckley learned that the house had “a leaky roof, defective windows, no fire escape and
permission problems’.

He then sued the couple, claiming he overpaid for the house based on their inaccurate property information.

A jury found in his favor, awarding him $200,000 from the Bartenwerfers.

The couple was unable to pay the award or other creditors and filed for protection under Chapter 7 of the bankruptcy code, which typically allows people to discharge all their debts.

But “not all debts are dischargeable,” Barrett wrote in her ruling.

“The Code makes several exceptions to the general rule, including the one at issue in this case: Section 523(a)(2)(A) prohibits the discharge of “any indebtedness . . . for money . . . to the extent obtained by . .. false claim, misrepresentation or actual fraud,” Barrett wrote.

Buckley challenged the couple’s move to cancel their debt to him on that basis.

A U.S. bankruptcy judge ruled in his favor, saying “neither David nor Kate Bartenwerfer can repay their debt to Buckley,” Barrett’s opinion said.

“Based on the testimony of the parties, real estate agents and contractors, the court found that David knowingly concealed defects in the home from Buckley,” Barrett wrote.

“And the court attributed David’s fraudulent intent to Kate because they formed a legal partnership to carry out the renovation and resale project,” she added.

The couple appealed this decision.

The US Bankruptcy Board of Appeals for the 9th Circuit Court of Appeals found that David still owes Buckley due to his fraudulent intent.

But the same group did not agree that Kate was guilty.

“As the panel saw [a section of the bankruptcy code] barred her from repaying the debt only if she knew or had reason to know of David’s fraud,” Barrett wrote.

Buckley later asked the Supreme Court to hear his appeal of the decision.

In her opinion, Barrett noted that the text of the bankruptcy code clearly prohibits a debtor from using Chapter 7 to discharge a debt if that obligation was the result of “false appearance, misrepresentation, or actual fraud.”

Barrett wrote, “By its terms, this text does not allow Kate Bartenwerfer to absolve herself of a state court decision.”

The judge noted that Kate contested that, despite her admission, “that, grammatically, the passive lien statute does not define a fraudster.”

“But, in her view, the statute is most naturally interpreted to bar the recovery of debts for money obtained by the debtor’s fraud,” Barrett wrote.

“We disagree: passive voice takes the actor off the stage,” Barrett wrote.

The justice wrote that Congress, in writing the relevant section of the bankruptcy code, “worded it to[s] about an event that occurs without reference to a particular entity and therefore without regard to the intentions or fault of the acting party’.