CORREA INTRODUCES BIPARTISAN BILL TO FREE INNOCENT PARTNERS FROM DEBT THEY DIDN'T CREATE

WASHINGTON, D.C. - Congressman Lou Correa (D-CA), alongside Congresswoman Laurel Lee (R-FL), introduced the bipartisan Bankruptcy Relief for Innocent Partners Act, which would ensure that people are not stuck with debt from fraud their partner committed alone, and that survivors of domestic and financial abuse are not forced to stay in dangerous relationships for financial reasons.

"If you didn't commit the fraud, you shouldn't carry the debt for the rest of your life," said Correa. "For a survivor of abuse, that debt can be a chain. Abusers use debt to control their partners and keep them from leaving. This bill removes one more chain."

"No one should be left responsible for debt caused by a partner's fraud they neither knew about nor participated in," said Laurel Lee. "For victims of domestic or financial abuse, being forced to bear the financial consequences of a partner's wrongdoing can compound an already devastating situation. The Bankruptcy Relief for Innocent Partners Act is a matter of fundamental fairness. It provides meaningful relief for innocent individuals while ensuring our bankruptcy laws hold those who commit fraud accountable."

The bill amends the Bankruptcy Code so that only the person who committed fraud is barred from discharging the resulting debt. Innocent partners would get the same fresh start as any other honest filer. The bill also protects survivors of domestic and financial abuse from being forced to stay in a relationship for financial reasons.

"NACBA strongly endorses this legislation because a person can be held legally responsible for someone else's fraud without having committed fraud themselves. Bartenwerfer blurred that critical distinction in bankruptcy, allowing an innocent debtor to be saddled for life with a debt arising from misconduct they neither knew about nor could prevent. This bill would restore a simple rule: the extraordinary consequence of nondischargeability for fraud should follow the person who committed the fraud. It does not excuse wrongdoing or eliminate anyone's underlying liability-it ensures that an honest debtor is not denied a fresh start because of someone else's misconduct. We're grateful to Representative Correa and his colleagues on both sides of the aisle for taking it up," said Richard Nemeth, President, National Association of Consumer Bankruptcy Attorneys (NACBA).

"Ninety-nine percent of domestic violence survivors experience economic abuse and half experience coerced debt. Beyond the hard costs, coerced debt creates an economic ripple effect by damaging credit, and preventing a survivor from accessing housing, employment and the basic resources needed to be safe. The Bankruptcy Relief for Innocent Partners Act would provide critical relief to domestic violence survivors who are burdened with debt through no fault of their own. By naming the fraud, this legislation will remove a substantial barrier to bankruptcy relief, offering a pathway to economic security and safety for domestic violence survivors across the nation," said Erika Sussman, Founder & Executive Director, Center for Survivor Agency and Justice.

View the bill text here.

Background

In Bartenwerfer v. Buckley, a couple ran a house-flipping business together, and one partner committed fraud without the other's knowledge. After the couple filed for bankruptcy, the Supreme Court ruled that current law did not allow the innocent partner to discharge the fraud-related debt.

The issue is especially serious in abusive relationships. Half of domestic abuse survivors report experiencing "coerced debt," where abusers use debt to maintain control and limit their partners' economic resources.