The U.S. Bankruptcy Code provides that a personal debt is not dischargeable if the debt had been occasioned by the debtor’s defalcation while acting in a fiduciary capacity. Courts of appeals had long disagreed about the mental state that must accompany the bankruptcy-related definition of “defalcation,” particularly in the context defalcation by trustees. The U.S. Supreme Court has recently settled the matter. Charles E. Rounds, Jr. explains in an updated version of Section 7.4 of Loring and Rounds: A Trustee’s Handbook (2013).
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