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Ask a Bankruptcy Attorney: What Happens When a Creditor Objects to My Bankruptcy Filing?

If and when you have an aggressive creditor, whether you are a firm or an individual, your bankruptcy case becomes considerably more difficult. Many creditors understand that you are filing bankruptcy for valid reasons, not with the purpose of defrauding or misrepresenting them. As a result of this reality, they rarely contest, i.e. oppose to, your discharge.

However, some creditors, such as an ex-spouse or former business partner, oppose to a debtor’s bankruptcy case for personal or emotional reasons. Other creditors, such as credit card companies or third-party lenders, may believe they have legal reasons to object to the discharge of their debt.

Fraud, misrepresentation, theft, drunk driving, or any other offense mentioned in Section 523 of the Bankruptcy Code are common examples. To discuss any worries you have about a creditor challenging your discharge, contact our The Law Offices of Paul Y. Lee at 951-755-1000. Remember that we can begin with a free bankruptcy consultation.

Creditors have the right to file an adversary proceeding in order to challenge your bankruptcy discharge

In most circumstances, creditors have 60 days following your 341A Meeting of Creditors to file an Adversary Proceeding and file a formal complaint with the bankruptcy court to object to your discharge. This starts a “mini-lawsuit” in which creditors must prove that your debt should not be discharged. Falsifying a credit application, not intending to repay the obligations, acquiring debt prior to filing bankruptcy, and other justifications have been made.

To avoid a default judgment, respond to the complaint

When a creditor lodges a complaint against you, you only have a limited amount of time to respond. If you fail to submit a timely responding pleading, usually the Answer, a default judgment will be entered against you. The debt is not discharged, and creditors may object to the discharge of all of your debts in bankruptcy in some situations.

Settlement as a means of avoiding trial

Following the filing of your reply pleading, there is a “discovery” period during which you can exchange information, documents, depositions, and other requests. Motions can be filed, and a trial before a bankruptcy court is possible. Few instances go all the way to trial, although it depends on the creditor’s motivation and intent. Most of the time, a settlement can be reached since the cost of a trial may outweigh the chances of a successful outcome.

An objection to your bankruptcy discharge, i.e. the filing of an adversary proceeding, can have substantial ramifications, even if it is uncommon. This is just one of the many reasons that it is important to work with an experienced bankruptcy attorney to help with your case.