After a bankruptcy case is filed, creditors, the bankruptcy trustee, and the United States trustee are allowed time to object to the debts of the debtor being discharged through the bankruptcy process. If no one objects, dischargeable debt will usually be automatically discharged. This list of non-dischargeable debt differs based upon which type of bankruptcy is filed, or rather, under which part of the bankruptcy code the bankruptcy is filed.
If a creditor wishes to file an objection to the discharge of debt, the creditor will file a complaint with the bankruptcy court. This initiates an adversary proceeding.
Injunction Against Debt Collection After Discharge
If the court determines there is debt that will be discharged the court will issue an injunction against collection efforts to obtain payment of the debt.
Creditors will receive the order of discharge from the court’s clerk. The order will not inform creditors specifically which debts are non-dischargeable. This order also informs creditors that they are not permitted to attempt to collect discharged debts previously owed to them.
A creditor who violates the order may be held in contempt by the court, often resulting in a fine to the creditor for this violation.
Revoking a Discharge
The court may revoke a discharge under certain circumstances.
A trustee, creditor, or the U.S. trustee may request that the court revoke the debtor’s discharge in a chapter 7 case based on allegations that the debtor:
- obtained the discharge fraudulently;
- failed to disclose the fact that he or she acquired or became entitled to acquire property that would constitute property of the bankruptcy estate;
- committed one of several acts of impropriety described in section 727(a)(6) of the Bankruptcy Code; or
- failed to explain any misstatements discovered in an audit of the case or fails to provide documents or information requested in an audit of the case.
Typically, a request to revoke the debtor’s discharge must be filed within one year of the discharge or, in some cases, before the date that the case is closed. The court will decide whether such allegations are true and, if so, whether to revoke the discharge.
Chapters 11, 12, and 13
In chapter 11, 12, and 13 cases, if confirmation of a plan or the discharge is obtained through fraud, the court can revoke the order of confirmation or discharge.
Voluntary Repayment by a Debtor
A debtor who has received a discharge may voluntarily repay any discharged debt. A debtor may repay a discharged debt even though it can no longer be legally enforced. Sometimes a debtor agrees to repay a debt because it is owed to a family member to protect the debtor’s reputation.