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Judge rules that daycare cannot use Chapter 13 to avoid lawsuit

When Tennessee business owners make the decision to file for bankruptcy, it's typically because they owe too much debt. However, a daycare facility has filed for bankruptcy in order to avoid having to pay damages to two families who are suing the owners for abuse. The families have filed a lawsuit against the daycare after employees instigated a fight between three boys and then videotaped the event on a cell phone.

The two daycare owners filed for Chapter 13 bankruptcy to avoid paying damages to the suing families. However, a judge denied the filing, stating that it would cause a dangerous precedent. It would show others that they can intentionally cause harm to others and then hide from financial damages under the shield of a bankruptcy. The daycare owners would then not have to face responsibility for their actions.

The daycare owners do not face criminal charges for the March 2012 incident, which involved one toddler punching another and the second toddler punching a third boy, who is crying and screaming. However, the owners do face a civil lawsuit because the daycare facility has allegedly had previous instances of this type of abuse. The workers who witnessed the fight allegedly laughed at the boys and forced them to fight each other, even as they tried to flee the scene. The workers received probation for assault and conspiracy charges.

Although Chapter 13 can help with debt relief, it is not intended to protect someone against lawsuits. In addition, certain debts cannot be discharged in a bankruptcy, including damages caused by someone purposely causing harm to another person, which applies in this case. Business ownership involves a lot of responsibility, including keeping clients - especially young children - safe from harm.

Source: The Wall Street Journal, "Daycare Owners Can't Escape Possible Abuse Damages in Bankruptcy," Peg Brickley, June 13, 2014

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