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Can Creditors Object to Debt Discharge?

Nov. 12, 2019

When filing for Chapter 7 bankruptcy, debtors can have a great portion of their debt discharged. However, creditors can also have a say in the process, and in some cases, creditors may even object to discharges depending on the circumstances. The United States Courts explain how Chapter 7 discharges actually work and what to expect from the process.

First, you should understand which debts are eligible for discharge and which are not. Things like child/spousal support, tax liens, damages awarded due to personal injury cases, student loans, fines, penalties, and other types of debt are typically excluded from discharge. Additionally, people filing for Chapter 7 must list all debt in their name so it can be considered by the court. If they fail to list a certain debt, it will not be included in the filing and the person will still be obligated to pay it.

Even if a debt is eligible for discharge according to the court, creditors are still allowed to object to it. All creditors will be notified upon the initial bankruptcy filing and will have a specific amount of time in which they can object. If they fail to file a notice in time, their objections will not apply to the case. The trustee overseeing the bankruptcy case is also able to file an objection if he or she sees fit.

There are a number of reasons why a creditor may choose to object. For example, any attempts to hide or destroy financial records could be construed as an attempt to conceal information, which will likely result in an objection. The person filing will also be obligated to take certain steps, such as undergoing a financial education course to prevent future issues. If the course is not attended, a creditor may object to a discharge. Other reasons for objection include transferring property or assets into another person’s name to preserve them for future use.