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Four Arguments for Denying Chapter 7 Bankruptcy Discharge

Posted on in Bankruptcy

Four Arguments for Denying Chapter 7 Bankruptcy DischargeThe primary reason that creditors do not want debtors to file for bankruptcy is the possibility of discharging the debt. At the end of a Chapter 7 bankruptcy case, the court will discharge most of the remaining debts that were not paid from the sale of nonexempt assets. Secured creditors can repossess the collateral property but cannot collect on the loan balance without a reaffirmation agreement. Debts to unsecured creditors may be completely wiped out. Creditors can attempt to deny the discharge of their debts by using an adversary proceeding against the bankruptcy filer. They must prove that the debtor is attempting to defraud them through bankruptcy. There are several reasons why a court may agree to deny the discharge of debts:

  1. Lying During Bankruptcy: A debtor may abuse the bankruptcy process in order to discharge debts that they are capable of paying. A court may deny the discharge of all debts if the debtor lied or withheld information with the intent to defraud the creditors and manipulate the system.
  2. Lying on the Loan Application: A debtor may have entered a loan agreement under false pretenses, such as misrepresenting their income in order to qualify for the loan. The debt is ineligible for discharge because the debtor was attempting to defraud the creditor by incurring debts that they knew they could not repay.
  3. Racking Up Last-Minute Debts: A debtor who intends to file for bankruptcy may think they are being sneaky by making several purchases with their credit card immediately before they file. The court will assume that these debts are nondischargeable if the debtor used a single creditor to purchase at least $725 worth of luxury items within 90 days of filing for bankruptcy. A similar rule exists for cash advances on a credit card. In both instances, the debtor is adding to their debt under the assumption that it will be discharged.
  4. Transferring Nondischargeable Debts: There are certain debts that cannot be discharged through bankruptcy, such as child support, spousal maintenance, unpaid taxes, and student loans. The debtor may think they can work around this by using a credit card to pay a large portion of these debts and then discharging the credit card debt during bankruptcy. Courts do not allow bankruptcy filers to clear their nondischargeable debts by transferring them to a form of debt that is dischargeable.

Contact a Chicago Creditor’s Rights Lawyer

You have only 60 days after the meeting of creditors to object to a discharge of your debt through bankruptcy. A Chicago creditor’s rights attorney at Walinski & Associates, P.C., can explain your options for responding to a bankruptcy filing. To schedule a consultation, call 312-704-0771.


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