Those filing Chapter 7 bankruptcy almost always get a discharge. The law presumes the individual is entitled to a discharge. Only if a creditor or trustee challenges the entitlement to a discharge by filing an adversary proceeding is there an inquiry.
My clients imagine that they must justify the filing of their case or prove their good faith efforts to avoid bankruptcy or that some judge ponders each case to decide if a discharge is warranted. That’s not the way it works. The discharge is entered unless there is a successful claim that the debtor isn’t eligible for a discharge.
Why might a discharge be denied? The grounds for denial of discharge are set out in Section 727 of the Bankruptcy Code. The most obvious reasons are a prior bankruptcy discharge too close in time or some form of dishonesty with respect to the bankruptcy process: hiding assets, failure to cooperate with the trustee, or destruction of books and records that would tell the story.
Denial of discharge is different from a creditor challenging the dischargeability of their debt. In an action for a finding of non dischargeability, the creditor usually contends that his debt was incurred by some form of dishonesty on the part of the debtor. The creditor’s goal is that his debt, and his debt alone, survive the bankruptcy case. Even if one credit obtains a finding that his debt cannot be discharged, that finding does not bar the discharge of all of the other dischargeable debts in the case.
If a judge finds, after trial, that a debtor isn’t entitled to a discharge, then all of the debts that existed at the time of filing live on beyond the bankruptcy case. Denial of discharge is very rare, in my experience.
So, relax. Make full disclosure of your assets and your financial history. Be responsive to the trustee’s requests. Follow your attorneys instructions and you will emerge from bankruptcy with a discharge order.
Cathy Moran, Esq.
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Last modified: June 19, 2011