Creditors in a bankruptcy case get 60 days from the 341 meeting to file objections. Just what kind of objections can a creditor in a bankrupty file?
Creditors can object to two things: the dischargeability of their claim against the debtor or the grant of a discharge as to all debts. They can’t object just because they are unhappy at losing their right to collect.
Creditors can object to discharge of their debt
Three kinds of debts created by some form of bad behavior are not automatically excluded from the discharge. Rather, these debts may survive the discharge in bankruptcy only if the creditor files a timely lawsuit within the bankruptcy case. They must then prove at trial that the debt in question meets the legal standards for surviving the bankruptcy.
Which debts are subject to challege
Debts only potentially dischargeable include
- Debts incurred by fraud
- Debts for theft or breach of fiduciary duty
- Intential harm to person or property
The required lawsuit, called an adversary proceeding, must be filed within 60 days of the 341 meeting of creditors.
Objecting isn’t enough
Just objecting doesn’t mean that the debt is automatically excluded from the discharge. The creditor must prove at trial the facts that match the bankruptcy legal standard for exception from discharge.
The debtor enjoys a legal presumption that the debt is dischargeable. The creditor must overcome that presumption. If the creditor fails to establish sufficient facts, the debtor wins and the debt is discharged.
Creditors who snooze, lose
Failure to file the required adversary proceeding within 60 days of the 341 meeting results in the discharge of the debt, even if fraud or other bad behavior was involved.
Creditors can object to the discharge of all debts
Creditors can object to the debtor getting a discharge of any of his debts. The grounds for denial of discharge largely center on claims that the debtor’s actions harm all creditors or undermine the bankruptcy system.
The most common grounds for denial of discharge include
- Actions to hinder or defraud creditors as a group
- Failure to keep appropriate records
- Failure to cooperate with the trustee or follow court orders
- Perjury
- Concealing assets
The complete list of grounds for denial of discharge are found at 11 U.S.C. 727(a).
Like challenges to the dischargeability of a particular debt, an adversay seeking denial of discharge must be filed within 60 days of the date of the 341 meeting of creditors. Federal Rule of Bankruptcy Procedure 4004.
Objections to discharge are generally quite rare.
