New Yorkers who have been overcome by debt and are seeking a discharge by filing for bankruptcy should be aware of certain factors that could impact the success or failure of the case. For individual debtors without property and assets that can be used to settle their secured debts, Chapter 7 is generally the best alternative. However, it is imperative to understand the rules when filing for bankruptcy under Chapter 7 and that there is no guarantee there will be a discharge. Knowing when creditors have the right to object to the discharge is key to avoiding these pitfalls and clearing the debt.
With Chapter 7, objections can be lodged by several entities. That includes a creditor, the trustee overseeing the case, or the U.S. trustee. When the case is filed, creditors are given various pieces of information. Included in that is the date at which the objection must be filed. For there to be an objection, the creditor is required to make the complaint prior to that deadline. This will spur a lawsuit called an "adversary proceeding."
There are many reasons why a court might decide to deny the debtor a discharge under Chapter 7. If, for example, the debtor does not give the tax documents as requested; does not take and complete a personal financial management course; is found to have transferred to concealed property in an attempt at defrauding, delaying or hindering creditors; was caught destroying any records or books; did not account for asset loss; or was found to be violating a court order or a discharge that had been granted previously, there can be an objection. The party making the objection is subject to the burden of proof.
Filing for personal bankruptcy is a difficult decision. Once the person decides to move forward with it, there is an expectation and hope that it will be completed without problems so they can move on and restart their financial lives free of debt. Creditors and others do have the right to object. Even when there is an objection, it does not necessarily mean the case will be unsuccessful. Having a law firm that is experienced in helping clients file for and complete a Chapter 7 can deal with every eventuality, whether there is an objection or not.