Why a Creditor May File an Objection to Discharge in Bankruptcy

If certain conditions are met, a creditor can challenge your discharge.

When you file for bankruptcy, all creditors listed in your petition receive notice of your case.  In addition to questioning you at the meeting of creditors (also called the 341 hearing), your creditors have the right object to your discharge under certain circumstances. Read on to learn more about why a creditor may file an objection to your discharge.

What Is an Objection to Discharge?

A bankruptcy discharge eliminates your obligation to pay back any debts that are discharged in your case. Certain debts (such as alimony, child support, and recent tax obligations) are automatically considered nondischargeable in bankruptcy.

In addition, the bankruptcy court has the power to deny your discharge for a debt that is normally dischargeable (such as a credit card obligation) if certain conditions are met. If a creditor believes that its debt should not be discharged in your case, it has 60 days from the initial date set for your meeting of creditors to file an objection to your discharge.

To learn more, see What is an Objection to Discharge in Bankruptcy?

Reasons Why a Creditor May Object to Your Discharge

Most creditors object to the discharge of their own particular debt. This means that if the creditor objection is successful, only that debt is excepted from your discharge. However, if you lie on your bankruptcy papers or abuse the bankruptcy system, a creditor may ask the court to deny your discharge for all of your debts.

The following are the most common reasons why a creditor may file an objection to your discharge:

You Bought Luxury Items on Credit Prior to Bankruptcy

If you bought luxury items (things that are not necessary to support yourself such as vacations or expensive electronics) totaling over $675 (as of April 2016) in aggregate on credit within 90 days of your bankruptcy, it is presumed to be nondischargeable. This means that if the creditor files an objection to your discharge, you must prove that the debt is dischargeable because it was a necessary expense and not a luxury good or service.

You Took Out Cash Advances Before Filing for Bankruptcy

Similar to purchasing luxury items on credit, cash advances from a credit card or other consumer credit plan totaling over $950 (as of April 2016) in aggregate taken out in the 70-day period preceding your bankruptcy are presumed to be nondischargeable as well.

You Obtained Debts Through Fraud, False Pretenses, or Misrepresentation

If you lied on a loan application or otherwise used fraud, false pretenses, or misrepresentation to obtain a debt (this includes not intending to pay back the debt at the time you took it out), that creditor has grounds to object to your discharge. Fraudulent debts are not dischargeable in bankruptcy. However, it is typically very difficult to prove fraud in bankruptcy court. As a result, most creditors will not file an objection based on fraud unless they believe they can prove it in court.

You Used Your Credit Card to Pay a Nondischargeable Debt

If you used your credit card (or incurred an otherwise dischargeable debt) to pay off a nondischargeable obligation, that creditor will typically have grounds to object to your discharge. In general, you cannot incur dischargeable debts to pay off nondischargeable obligations. The most common example of this is paying your nondischargeable priority tax obligations with your credit card.

You Committed Fraud in Your Bankruptcy Case or Abused the Bankruptcy System

If you hide assets, lie on your bankruptcy papers, file for bankruptcy solely to delay creditors, or otherwise abuse the bankruptcy system, your creditors (or the bankruptcy trustee) can ask the court to deny you the benefit of a discharge for all your debts. Committing bankruptcy fraud is a serious offense that can result in the loss of your discharge or even imprisonment.

For more information, see Bad Faith Filing in Bankruptcy Cases.

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