There is no definite position by the Bankruptcy Courts that damages awarded in sexual harassment/ discrimination lawsuits are nondischargeable. Each case is reviewed on its own merits.
In a recent case, the debtor was a dentist. His assistant had worked for him for 19 months and quit her job because of the dentist’s sexual harassment. Although the dentist defaulted at trial after providing substantial discovery, a damage inquest took place and the assistant was awarded $302,154.88 for damages including legal fees.
The dentist filed for Chapter 13 bankruptcy.
The assistant filed a complaint asserting that her claim was non-dischargeable since the court found that the dentist’s actions were a “willful or malicious injury” and punitive damages were awarded.
In this case, the state court determined that the debtor “engaged in conduct where he sexually harassed his assistant by touching her inappropriately over her vehement objections”. The dentist continued this behavior with the knowledge that the assistant was seeking therapy because she did not like to be touched. The dentist continued mocking her for not wanting to be touched throughout the 19 months of her employment. These findings support the judgment for intentional discrimination.
In support of the punitive damages award, the state court found not only that the debtor continued his inappropriate touching in the face of perceived risk that his actions would violate federal law, but the dentist willfully and “with knowledge” violated the law.
Thus, the state court’s findings in support of punitive damages rise above the minimum “reckless indifference” standard. The Court also found that these findings established malice under Section 1328 (a)(4).
You cannot exempt a willful act of sexual harassment and damages to an individual even if they are not physical. Bankruptcy does not give you a way to avoid your responsibilities under the law when you intentionally hurt another.