If I file bankruptcy on a creditor, can they object?
If you file bankruptcy, under specific conditions, your creditors are legally allowed to object to the Chapter 7 or Chapter 13 discharge. If creditors choose to object to the discharge of specific debts the objection must be made sixty days from the initial date set for the meeting of the creditors. Failure of the creditor to attend the creditor's meeting, however, does not eliminate the right to object to the discharge of the debt.
If you file Chapter 7 bankruptcy most of your unsecured debts will be discharged. Certain debts, including child support payments, recent tax obligations and alimony payment are not discharged. The bankruptcy court also has the right to deny your discharge for other debts if the creditor can prove the debts should not be discharged.
Common creditor objections to debt discharge
The most common reasons a creditor may object to a discharge is if they believe you have falsified your bankruptcy petition or forms; you purchased luxury items prior to filing bankruptcy; you took cash advances before filing bankruptcy; you used your credit card to pay a nondischargeable debt; you incurred your debts through false pretenses, misrepresentation or fraud; or you have committed fraud in your bankruptcy case. Below we will discuss each example in more detail.
1. Purchase of luxury items prior to bankruptcy filing
Creditors may object to your bankruptcy filing if you purchased luxury items, which is defined as unnecessary items not needed for support. If the aggregate cost of these items is more than $650 and the purchase was made within 90 days of your bankruptcy filing, this debt is generally not discharged. If a creditor objects to these charges you will have to prove they were a necessary expense and not a luxury purchase.
2. Cash advances made prior to filing bankruptcy
Creditors may object to any cash advances if they are over $925 and they are made within 70 days before you have filed bankruptcy.
3. Credit card charges made to pay nondischargeable debts
If you are thinking of using your credit card to pay off debts that you will not have discharged in bankruptcy such as a tax debt– think again. Creditors have the legal right to challenge these actions.
4. Debts incurred through Fraud, False Pretenses, or Misrepresentation
Although this type of action is difficult to prove, if a creditor believes you have obtained a line of credit or any type of loan by fraud, false pretenses, or misrepresentation they are allowed to challenge the discharge of this debt in bankruptcy.
5. Commission of bankruptcy fraud
Creditors have the legal right to challenge any discharge of debt if they believe you have committed fraud in your bankruptcy. Fraud can include lying on your bankruptcy petition or schedules, hiding your assets, abusing the bankruptcy system or filing bankruptcy to delay creditors from collecting debts. Committing fraud is illegal and could result in serious fines, penalties or even imprisonment.
Talk to your bankruptcy lawyer if you have questions about a creditor's right to challenge your debt discharge.
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Bankruptcy is not wrong for those who have made an honest effort to pay creditors.