The point of filing for bankruptcy is to have your debts discharged. Bankruptcy is an effective way to get a clean slate and start over. There are times, however, when creditors do not want to issue a discharge of debt and request the bankruptcy court to deny the request. This is called an “Objection to Discharge” and it can result in complicated legal cases.
During an Objection to Discharge action, the trustee or creditor must show why they disagree with the discharge. In many cases, the creditor will allege that the debtor engaged in actions that harmed the creditor. The Bankruptcy Court will have to review if the debtor concealed, removed, manipulated or transferred property when filing for bankruptcy. They may also look at if the debtor knowingly made a false oath or statement and if the wrongful activity took place within a year before or after the filing.
Determining whether or not the debtor took wrongful action can be a complicated process. It is not against the law to liquefy property to survive heavy financial burdens as long as there is intent to pay creditors. It is common in these types of cases for creditors to attempt to smear the reputation of the debtor. They want the actions of the debtor to appear devious so that he or she will be required to pay what is owed. This can lead to complex and hurtful allegations.
It is the role of the court to review the facts. In general, the court tends to put the burden of proof on the creditor. For this reason, many creditors find it easier to file a “nondischargeability” complaint instead of an Objection to Discharge action. This allows them to dispute a specific, single debt. If successful, the debtor may still have one debt that must be repaid, but will have the other debts removed.
Whether you are an individual filing for bankruptcy or a creditor looking to object to a discharge of debt, you will need legal guidance to help you prove your case. Please contact an experienced Orange County bankruptcy lawyer for more information.