The debtor does not have an absolute right to a discharge in a Chapter 7 bankruptcy proceeding. A creditor, the case trustee or the US trustee can object to the discharge
Procedure
The trustee or the creditor who wants to object to a discharge must file a complaint in the bankruptcy court objecting to the discharge. Filing of a complaint objecting to the discharge starts an adversary proceeding within bankruptcy proceeding. When a creditor files an objection to the discharge of its debt, the rest of the bankruptcy proceedings will proceed normally. The debtor is then granted a limited time to respond to the complaint. Once the debtor files his or her response, the discovery period begins. During the discovery period, both parties gather evidence in support of their respective cases. The trial begins once the discovery period is over. During trial, both parties can call witnesses in support of their case. If the bankruptcy court determines that the objection is valid, the debt(s) will be declared non-dischargeable. The creditor(s) can then collect the debt(s) according to the State law. If the debtor prevails, the debt will be discharged.
Grounds
The objection must be filed within 60 days from the first date set for the creditors meeting. Generally, the creditors have less than 90 days from the date on which they receive the notice of the bankruptcy filing to file an objection. The trustee or the creditors can file a complaint objecting to the discharge of a debt on many grounds including:
- failure to provide financial details sought by trustee
- failure to maintain and submit adequate financial records
- unsatisfactory explanation for a loss of assets
- bankruptcy papers contain materially false statement(s)
- failure to obey a lawful order of the bankruptcy court;
- fraudulent transferred, concealment or destruction of property of the bankruptcy estate.
- having received a discharge in a prior case filed within the last 6 years.
Chapter 7
Creditors and the trustee can object to a discharge only in a Chapter 7 bankruptcy proceeding. They cannot object to the discharge of a debtor in a Chapter 12 or Chapter 13 proceeding. They can only object to the repayment plan but if the debtor makes payment according to the repayment plan, they cannot object to the discharge.
When to Talk to a Lawyer
Overcoming an objection to a discharge in a bankruptcy proceeding is complex. If the trustee or any creditor has filed a complaint objecting to your discharge, you should consult with an experienced bankruptcy attorney.
