JUSTICE STEVENS delivered the opinion of the Court.
Section 523(a) of the Bankruptcy Code provides that a discharge in bankruptcy shall not discharge an individual debtor from certain kinds of obligations, including those for money
Petitioners brought an action against respondent alleging that he had defrauded them in connection with the sale of certain corporate securities. App. 16-25. Following the trial court's instructions that authorized a recovery based on the preponderance of the evidence, a jury returned a verdict in favor of petitioners and awarded them actual and punitive damages. Id., at 28-29. Respondent appealed from the judgment on the verdict, and, while his appeal was pending, he filed a petition for relief under Chapter 11 of the Bankruptcy Code, listing the fraud judgment as a dischargeable debt.
The Court of Appeals for the Eighth Circuit reduced the damages award but affirmed the fraud judgment as modified. Grogan v. Garner, 806 F.2d 829 (1986). Petitioners then filed a complaint in the bankruptcy proceeding requesting a determination that their claim based on the fraud judgment should be exempted from discharge pursuant to § 523. App. 3-4. In support of their complaint, they introduced portions of the record in the fraud case. The Bankruptcy Court found that all of the elements required to establish actual fraud under § 523 had been proved and that the doctrine of collateral estoppel required a holding that the debt was therefore not dischargeable. In re Garner, 73 B.R. 26 (WD Mo. 1987).
The Court of Appeals, however, reversed. In re Garner, 881 F.2d 579 (1989). It recognized that the "Bankruptcy Code is silent as to the burden of proof necessary to establish an exception to discharge under section 523(a), including the exception for fraud," id., at 581, but concluded that two factors supported the imposition of a "clear and convincing" standard, at least in fraud cases. First, the court stated that the higher standard had generally been applied in both common-law fraud litigation and in resolving dischargeability
The Eighth Circuit holding is consistent with rulings in most other Circuits,
At the outset, we distinguish between the standard of proof that a creditor must satisfy in order to establish a valid claim against a bankrupt estate and the standard that a creditor who has established a valid claim must still satisfy in order to avoid dischargeability. The validity of a creditor's claim is determined by rules of state law. See Vanston Bondholders Protective Comm. v. Green, 329 U.S. 156, 161
This distinction is the wellspring from which cases of this kind flow. In this case, a creditor who reduced his fraud claim to a valid and final judgment in a jurisdiction that requires proof of fraud by a preponderance of the evidence seeks to minimize additional litigation by invoking collateral estoppel. If the preponderance standard also governs the question of nondischargeability, a bankruptcy court could properly give collateral estoppel effect to those elements of the claim that are identical to the elements required for discharge and that were actually litigated and determined in the prior action. See Restatement (Second) of Judgments § 27 (1982).
In sum, if nondischargeability must be proved only by a preponderance of the evidence, all creditors who have secured fraud judgments, the elements of which are the same as those of the fraud discharge exception, will be exempt from discharge under collateral estoppel principles. If, however, nondischargeability must be proved by clear and convincing evidence, creditors who secured fraud judgments based only on the preponderance standard would not be assured of qualifying for the fraud discharge exception.
With these considerations in mind, we begin our inquiry into the appropriate burden of proof under § 523 by examining the language of the statute and its legislative history. The language of § 523 does not prescribe the standard of proof for the discharge exceptions. The legislative history of § 523 and its predecessor, 11 U. S. C. § 35 (1976 ed.), is also silent. This silence is inconsistent with the view that Congress intended to require a special, heightened standard of proof.
Because the preponderance-of-the-evidence standard results in a roughly equal allocation of the risk of error between litigants, we presume that this standard is applicable in civil actions between private litigants unless "particularly important individual interests or rights are at stake." Herman & MacLean v. Huddleston, 459 U.S. 375, 389-390 (1983); see also Addington v. Texas, 441 U.S. 418, 423 (1979). We have previously held that a debtor has no constitutional or "fundamental" right to a discharge in bankruptcy. See United States v. Kras, 409 U.S. 434, 445-446 (1973). We also do not believe that, in the context of provisions desigued to exempt certain claims from discharge, a debtor has an interest in discharge sufficient to require a heightened standard of proof.
We are unpersuaded by the argument that the clear-and-convincing standard is required to effectuate the "fresh start" policy of the Bankruptcy Code. This Court has certainly acknowledged that a central purpose of the Code is to provide a procedure by which certain insolvent debtors can reorder their affairs, make peace with their creditors, and enjoy "a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preëxisting debt." Local Loan Co. v. Hunt, 292 U.S. 234, 244 (1934). But in the same breath that we have invoked this "fresh start" policy, we have been careful to explain that the Act
The statutory provisions governing nondischargeability reflect a congressional decision to exclude from the general policy of discharge certain categories of debts—such as child support, alimony, and certain unpaid educational loans and taxes, as well as liabilities for fraud. Congress evidently concluded that the creditors' interest in recovering full payment of debts in these categories outweighed the debtors' interest in a complete fresh start. We think it unlikely that Congress, in fashioning the standard of proof that governs the applicability of these provisions, would have favored the interest in giving perpetrators of fraud a fresh start over the interest in protecting victims of fraud. Requiring the creditor to establish by a preponderance of the evidence that his claim is not dischargeable reflects a fair balance between these conflicting interests.
Our conviction that Congress intended the preponderance standard to apply to the discharge exceptions is reinforced by the structure of § 523(a),
We are therefore not inclined to accept respondent's contention that application of the ordinary preponderance standard to the fraud exception is inappropriate because, at the time Congress enacted the current Bankruptcy Code, the majority of States required proof of fraud by clear and convincing evidence.
Unlike a large number, and perhaps the majority, of the States, Congress has chosen the preponderance standard when it has created substantive causes of action for fraud. See, e. g., 31 U. S. C. § 3731(c) (False Claims Act); 12 U. S. C. § 1833a(e) (1988 ed., Supp. I) (civil penalties for fraud involving financial institutions); 42 CFR § 1003.114(a) (1989) (Medicare and Medicaid fraud under 42 U. S. C. § 1320a-7a); Herman & MacLean v. Huddleston, 459 U. S., at 388-390 (civil enforcement of the antifraud provisions of
Moreover, as we explained in Part I, supra, Congress amended the Bankruptcy Act in 1970 to make nondischargeability a question of federal law independent of the issue of the validity of the underlying claim. Even before 1970, many courts imposed the preponderance burden on creditors invoking the fraud discharge exception. See, e. g., Sweet v. Ritter Finance Co., 263 F.Supp. 540, 543 (WD Va. 1967); Nickel Plate Cloverleaf Federal Credit Union v. White, 120 Ill.App.2d 91, 93-94, 256 N.E.2d 119, 120-121 (1970); Gonzales v. Aetna Finance Co., 86 Nev. 271, 275, 468 P.2d 15, 18 (1970); Beneficial Finance Co. of Manchester v. Machie, 6 Conn. Cir. 37, 41, 263 A.2d 707, 710 (1969); Budget Finance Plan v. Haner, 92 Idaho 56, 59, 436 P.2d 722, 725
A final consideration supporting our conclusion that the preponderance standard is the proper one is that, as we explained in Part I, supra, application of that standard will permit exception from discharge of all fraud claims creditors have successfully reduced to judgment. This result accords with the historical development of the discharge exceptions. As we explained in Brown v. Felsen, the 1898 Bankruptcy Act provided that "judgments" sounding in fraud were exempt from discharge. 30 Stat. 550. In the 1903 revisions, Congress substituted the term "liabilities" for "judgments." 32 Stat. 798. This alteration was intended to broaden the coverage of the fraud exceptions. See Brown v. Felsen, 442 U. S., at 138. Absent a clear indication from Congress of a change in policy, it would be inconsistent with this earlier expression of congressional intent to construe the exceptions to allow some debtors facing fraud judgments to have those judgments discharged.
The judgment of the Court of Appeals is reversed.
It is so ordered.
"Exceptions to discharge.
"(a) A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt—
"(2) for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by—
"(A) false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor's or an insider's financial condition . . . ."
"A re-litigation of this case in Bankruptcy Court on the identical fact issues would be to permit the party who loses at a jury trial to have a second day in court on the same issue he and his opponent were fully heard previously. If permitted, all like cases would result in duplicitous litigation resulting in an unreasonable burden on the bankruptcy court." App. to Pet. for Cert. 28a.