Scheer v. State Bar of CA, No. 14-56622 (9th Cir. 2016)
Annotate this CaseMarilyn Scheer, an attorney with a suspended California law license, contends that the district court erred when it held that her debt to a former client was nondischargeable under 11 U.S.C. 523(a)(7). In this case, there were no costs or fees assessed for disciplinary reasons. Rather, the debt at issue was effectively the amount that Scheer improperly received from a client, but did not pay back. At its core, the $5775 at issue is not a fine or penalty, but compensation for actual loss. The court concluded that the the debt to her client does not fall within the section 523(a)(7) nondischargeability exception. Accordingly, the court reversed and remanded.
Court Description: Bankruptcy. The panel reversed the district court’s affirmance of the bankruptcy court’s decision that a suspended attorney’s debt was nondischargeable in bankruptcy under 11 U.S.C. § 523(a)(7). The state bar suspended the attorney for failure to pay a debt under an arbitration award concerning improperly collected client fees. She sought reinstatement of her law license under 11 U.S.C. § 525(a), which prohibits the government from revoking or refusing to renew a license “solely because” an individual has not paid a debt that is dischargeable in bankruptcy. IN RE SCHEER 3 The panel held that the debt did not fall within the scope of § 523(a)(7), which excepts from bankruptcy discharge a debt that “is for a fine, penalty, or forfeiture payable to and for the benefit of a governmental unit, and is not compensation for actual pecuniary loss.” The panel remanded the case to the district court.
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