18 May Filing for Bankruptcy: Can I Be Denied A Discharge?
Creditors believe that bankruptcy was seen as an ‘easy out’ for too many people and that consumers really could afford to pay their credit cards. In 2005, when the revisions to the bankruptcy code were passed, one new requirement was added to audit cases after the bankruptcy discharge was issued. In rare cases of ‘substantial aduse’, the auditors can recommend a revocation of the bankruptcy discharge. So the remedy you thought you had could be lost.
In the 18 months since the law became effective, how many cases have had their discharges revoked? Right now statistics are not available, but preliminary reviews of “substantial abuse”, that is, filing bankruptcy when there is the ability to pay occurs in less than .64% of cases. That is one case in every 140 filed – a very small number. Prior to the change in the law, estimates were that 25% of all cases filed were fraudulent.
The Bankruptcy Code has fixed a one-year period after the case is closed for the revocation of the discharge. So the answer is yes, you can lose your discharge, but only if you have concealed assets or committed fraud on the Bankruptcy Court which includes the U.S. Trustee. The moral of the story is to play it straight – the truth can’t hurt you.