Bankruptcy In Brief

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Denial Of Bankruptcy Discharge

reset button“Will my bankruptcy go through ?” is the anxious question.

The goal of a bankruptcy case is the discharge, the chance for a financial fresh start, a reset.

The discharge is the bankruptcy court order that says that all of your debts that are dischargeable by law are no longer enforceable against you.

Certain kinds of bad behavior with respect to the bankruptcy or to your creditors as a whole may be the basis for a challenge to your right to a discharge.

The debtor can be denied a discharge of all of his debts if the court finds, after trial, that the debtor committed certain acts deemed incompatible with the “honest but unfortunate debtor”.

Bad acts

Acts that may result in denial of discharge include

  • transferring, concealing or destroying assets or financial records; 
  • making a false oath on the schedules or under oath in the case; or
  • failing to keep books and records from which the debtor’s financial condition can be ascertained. 

The complete list is found at 11 U.S.C.  727.

If discharge is denied

Denial of discharge preserves the debtor’s liability to all creditors, whether or not the debtor committed some fraudulent act with respect to any particular creditor.

Denial of discharge doesn’t stop the administration of the case, either.

The trustee proceeds to gather and liquidate the assets of the estate, so the debtor loses not only the non exempt assets but any chance of ever discharging the existing debts in bankruptcy.

Denial infrequent

Discharges are not denied lightly or easily. Denial is intended as a penalty for debtors who deliberately try unfairly or dishonestly to thwart their creditors.

Any party who wants to challenge the debtor’s right to a discharge has to file an adversary complaint with the bankruptcy court within 60 days from the date set for the first meeting of creditors.

Discharges are entered as a matter of course unless there is a timely challenge.

Debtors who fully disclose their assets and their financial history should not worry about denial of discharge.

Read more

Individual debts that are not dischargeable

More about the discharge

Filing bankruptcy without a lawyer can risk discharge

Image courtesy of Flickr and orse. 

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643 Bair Island Road
Suite 403
Redwood City, CA 94063

Phone 650.694.4700

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About the Author
 
 
Northern California bankruptcy lawyer Cathy is a 30+ year veteran of bankruptcy practice in the Silicon Valley. She is known for energetic representation of clients and her command of bankruptcy law.

 

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