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When Can Creditors Object to a Bankruptcy Discharge?

In many cases, when a debtor owes money to a creditor in Columbia, South Carolina, the debtor ultimately will file for personal bankruptcy or business bankruptcy in order to seek a discharge. Some creditors will be repaid a relatively large portion of the debt owed if the debtor files for a reorganization bankruptcy under Chapter 13 (for personal bankruptcy) or Chapter 11 (typically for business bankruptcy). With a reorganization bankruptcy, the creditor receives a portion of the debt over a repayment period. With a Chapter 7 liquidation bankruptcy, however, the creditor is only eligible to receive payment from the amount of the debtor’s assets that are liquidated and make up the bankruptcy estate. Then, the creditor needs to be aware that priority debt is repaid first, and some creditors may not be eligible for much—if any—recompense.

Given that a debtor’s decision to file for bankruptcy often leaves the creditor with less than the total debt owed, many creditors want to know if they have any options to object to a bankruptcy discharge. Under the U.S. Bankruptcy Code, there are certain situations in which a creditor may be able to object to a discharge, and ultimately may be able to prevent the debtor from receiving a discharge of debts. The following are situations in which a creditor may be able to successfully object to a bankruptcy discharge.

Debts Are Non-Dischargeable

There are certain types of debts that are non-dischargeable in many or most circumstances under the U.S. Bankruptcy Code, such as alimony or child support debts, unpaid income tax debt, and other types of debts owed to a federal agency. If particular debts are non-dischargeable, the creditor can object to a discharge.

Debts Involve Fraud

Many situations in which creditors object to a discharge involve fraud or misrepresentation. Fraud can take many different forms. For example, a debtor might lie about assets or the value of assets on the bankruptcy petition or on bankruptcy schedules. Or, for instance, the debtor might unlawfully transfer property to another party to avoid liquidation immediately prior to filing for bankruptcy protection.

Fraud can also refer to situations in which a debtor provides false information at a bankruptcy hearing or commits perjury, or scenarios in which a debtor destroys property or documentation concerning the value of certain property. There are also other types of fraud that may not be as obvious. For example, if a debtor took cash advances on a credit card in the three months leading up to his or her decision to file for bankruptcy, that debt may not be dischargeable.

Debtor Engages in Intentionally Wrongful Acts

Certain actions concerning debt can also lead to a successful objection to discharge by a creditor. For instance, if a debtor intentionally caused damage to another party’s property with the aim of having the debts resulting from that damage discharged in a bankruptcy proceeding, the creditor may be able to object.

Contact a Columbia, SC Creditors’ Rights Attorney

To object to a discharge, the creditor needs to file a motion or a lawsuit (or adversary case) based on the type of debt to which it is objecting. An experienced creditors’ rights lawyer in South Carolina can discuss the details of the case with you to help you move forward. Contact Crawford & von Keller, LLC to learn more about how we assist creditors in South Carolina.

 

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