In consumer bankruptcy cases filed under Chapter 7 or Chapter 13, creditors have the opportunity to object to discharge of debts for a variety of reasons. There are three major categories of discharge objections: underlying misconduct, bankruptcy fraud and misapplication of bankruptcy law. Most discharge disputes can be avoided if a debtor is honest and diligent.
People are driven to bankruptcy by excessive debt due to various causes. In some cases, these debts are a result of egregious misconduct by the debtor. For example, drunk drivers who cause others bodily injury or death often get sued in civil court. If the victims or their survivors win a substantial judgment that the drunk driver is unable to pay, he or she may seek bankruptcy protection. But under the bankruptcy code, debts resulting from death or bodily injury due to drunk driving cannot be discharged. Other types of debtor misconduct that can result in discharge objections include fraud in a loan application and intentional destruction of property.
Another major source of discharge disputes is when a creditor or the trustee discovers financial fraud directly related to the bankruptcy filing. Some debtors hide or intentionally understate assets in their bankruptcy petition, or they transfer money and other property to close relatives or to secret accounts. In some cases, a debtor will intentionally run up debts in anticipation of filing bankruptcy in the immediate future. Any such conduct can amount to bankruptcy fraud that blocks discharge of a debt.
The third major type of discharge dispute is mistake or misapplication of the law. This often occurs when a debtor files for bankruptcy without retaining a bankruptcy attorney. Although there are publicly available bankruptcy guides and resources, debtors who proceed on their own frequently make mistakes that lead to creditor objections. In other cases, the parties may have a good faith dispute over the proper interpretation of a bankruptcy law or regulation. The result may be an objection and adversarial hearing on the matter.
It may not always be possible to avoid a discharge dispute. However, there are ways to minimize the chances of objections. Anyone facing bankruptcy should be forthcoming about every aspect of their assets, debts and overall financial situation. Bankruptcy fraud can result in civil penalties and even criminal charges. Finally, the debtor must make sure that all of the information in the bankruptcy filing is accurate and complete.
Jeff Field & Associates, with six offices in the Atlanta, Marietta and Athens areas, is experienced in handling a wide range of bankruptcy matters in Georgia. If you are struggling with debt, feel free to contact us online or call 404-381-1278 for a consultation.