When you file bankruptcy, you want the court to discharge the debt. Without the discharge, you’re still on the hook for your debts and may face legal issues. Just because you file bankruptcy, though, doesn’t ensure eligibility for a bankruptcy discharge.
Courts can revoke a discharge for many reasons and if they do, you may find yourself without your non-exempt property any longer.
Reasons to Revoke a Bankruptcy Discharge
Courts may remove a bankruptcy discharge for many reasons:
- You didn’t disclose all pertinent bankruptcy information, such as omitting the possession of certain assets, hiding assets by transferring them, or hiding specific documents
- You don’t follow court orders
- You don’t follow bankruptcy audit instructions and cannot provide proper documentation
- Creditors found out about fraud after you filed bankruptcy
- You didn’t complete your credit counseling requirements
- You fell behind on tax or child support obligations
- Refusing to turn over tax or financial records and/or destroying them before your court date
How a Bankruptcy Discharge is Revoked
Only creditors or bankruptcy trustees may revoke a discharge or petition to do so. They must file a formal complaint with the court. The complaint must include proof of the reason for the complaint. Once the court receives the complaint, they must notify you of the issue.
When you receive notification, you may oppose the order. You’ll attend a hearing where both parties are present and plead their case. At the hearing you may verbally oppose the petition and provide proof of why you think you’re right.
If you don’t win and the court revokes the bankruptcy, you’re back at square one.
Dealing with Creditors
If the court doesn’t discharge your bankruptcy, you owe the debts again. A bankruptcy discharge is not a right – it’s a privilege you must earn by following the proper steps.
If the court doesn’t discharge your bankruptcy, a few things may happen:
- You’ll owe the debts and must figure out a way to pay them
- The creditor can resume collection activities they stopped with the bankruptcy ‘stay’ order
- The trustee can take possession of your non-exempt assets, selling them to pay off your creditors
How Long Does a Creditor or Trustee Have to Revoke a Discharge?
In both Chapter 7 and Chapter 13 bankruptcy, creditors and trustees have one year from the discharge date to petition it.
Typically, though, most creditors or trustees petition at the start of the process, or as soon as they discover the issue, such as fraud. The case may stay open for a considerable time, though, so the trustee can sell the assets and settle the debts rather than discharging them.
Honestly, following the rules, and providing all documentation are important. If you follow these rules and don’t hide information or present incorrect information, you may not have to worry about a bankruptcy discharge. Bankruptcy privileges are for those that can’t afford their debts no matter what they tried. Anyone that takes advantage of the system may find not so pleasant results.