When a person files a Chapter 7 Bankruptcy, the goal is simple – discharge all debt. The Chapter 7 is designed to wipe your credit clean over a 4 month period without payments to creditors. In the vast majority of Chapter 7 cases, it goes that smoothly. However occasionally there can be troubles. A creditor may object to your proposed discharge. The Bankruptcy Code gives a creditor two options if it decides to object to a discharge – it can object to the discharge of its debt alone (found in Section 523) or it can object to the entire discharge (found in Section 727). Our office has successfully litigated multiple 523 and 727 cases and obtained a discharge for our clients in the face of creditor objections.
Our office filed a Chapter 7 for an individual who worked for himself and had accrued debt over the years trying to operate his business. After his case was filed, the debtor’s former life partner filed a very detailed action under Section 727 requesting that the debtor’s overall discharge be denied. The creditor’s claim contained 6 counts of alleged fraud and misrepresentations in his Bankruptcy pleadings, schedules and testimony. A case like this can be daunting for a person who is seeking his or her fresh start, but in this case our office was able to overcome the case by taking a systematic approach to the issues.
- Know your standard
When faced with a case such as this it is important to first determine the exact standard a Court will use when reviewing such actions. In this case, while the Creditor believed she and all other creditors had been “defrauded”, the actual Bankruptcy definition of fraud is very strict. A debtor must have intended to mislead creditors with specific actions. In this case, the creditor had to prove that specific assets and transactions were intentionally not listed on schedules and that if they had been listed there would have been assets for creditors. The creditor was unable to prove either of the standards.
- Pick your battles
The creditor in this case loved to issue discovery. Our office was swamped with multiple discovery requests over several months as the creditor tried to overwhelm the Debtor – a common tactic in litigation. In this case our office took a two prong approach – answer relevant discovery, object to irrelevant, overbroad discovery. The strategy proved successful. The Judge saw that the Debtor was complying with relevant information and the creditor was attempting to bully the Debtor. In the months leading to trial we were able to paint a picture of an overzealous creditor and a Debtor just trying to get his fresh start.
- Prepare, prepare, prepare
In the end, there is no substitute for preparation. When the case finally went to trial there were hundreds of exhibits and thousands of pages of discovery. The process to review and prepare was long and, at times, frustrating. However when the trial came, the Debtor was familiar with every issue that would be presented and the standard that the creditor faced. After a full day trial the Judge determined that the creditor failed to meet her burden and the Debtor was entitled to his discharge. A process that began over two years earlier reached a positive conclusion thanks to preparation and the hard work of a Debtor.
If you are facing an objection to discharge, do not be discouraged. The attorneys at The Sader Law Firm have the experience to help you litigate and receive the result you desire.