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Can Creditors Challenge a Debt Discharge?

Although bankruptcy is a great way to get out of debt for many people, sometimes the road to relief is less smooth than anticipated. This can happen when a creditor objects to a discharge of your debt owed to them, which can occur under certain circumstances.

Keep reading for more information about how creditors can challenge a debt discharge and why they might do it.

What Is an Objection to Debt Discharge?

An objection to a debt discharge is a creditor’s right to challenge your release from liability for a debt owed to them.

Objections can be raised at 341 hearings, where creditors can question the bankruptcy filer, under oath, about their assets, liabilities, and other matters pertaining to the bankruptcy case. After this hearing, creditors who have yet to object to discharge have 60 days to do so.

Why Would a Creditor Object to a Debt Discharge?

Creditors might object to debt discharges for a variety of reasons. Remember that a bankruptcy discharge releases you from having to pay back certain debts. Creditors wary of abuse of the bankruptcy system might object to a debt discharge when they believe the debt can or should be repaid.

Common reasons for discharge objections include the following:

  • Fraud, Misrepresentation, and/or False Pretenses. When creditors suspect debt was incurred as a result of any of these factors, a judge may deem it non-dischargeable. Also, debt may be deemed non-dischargeable if it’s believed a debtor committed fraud in their bankruptcy filing or is abusing the bankruptcy system.
  • The debtor took cash advances. If $1,100 or more in cash was secured from a credit card cash advance within 70 days before the bankruptcy filing, the debt is presumed to be non-dischargeable. Creditors can also challenge other large cash advances that may appear suspicious.
  • The debtor recently bought luxury items. Luxury items are things that don’t necessarily support someone or their dependents. Many different expenses can fall under this category. If more than $800 in such expenses is found within 90 days of a bankruptcy filing, the debt may be automatically non-dischargeable.
  • Credit was used to pay non-dischargeable debt. Credit card debt can be discharged, but not if a credit card was used to pay non-dischargeable debt, such as student loan payments or taxes. If a creditor suspects this has occurred, they may challenge the debt discharge.

Get Legal Assistance Today

If you are concerned that one or more of your creditors may object to debt discharge, an experienced bankruptcy lawyer can help you fight back. At Nguyen Law Group, our experienced attorney understands how necessary debt relief can be when someone needs to get back on their feet.

Rest assured that we’ll listen to your concerns and provide legal advance and services that can help you avoid this scenario or work through it should it occur.

For more information or to request a consultation, contact Nguyen Law Group online now.