Discharge / Dischargeability Actions
The bankruptcy adversary proceeding for discharge and dischargeability is often confused. The words are similar, and yet have different meanings. Discharge is one of the main reasons why people file bankruptcy – to permanently avoid payment of ALL of their debts and obligations by discharging them (with some exceptions). The bankruptcy trustee or a creditor may decide to file an adversary proceeding to deny a debtor’s discharge altogether.
However, there are very specific enumerated reasons why a person’s discharge can be denied. The bankruptcy laws favor a debtor receiving a discharge, unless one of these enumerated factors apply. Some examples are transferring assets with the intention to hinder, delay or defraud a creditor, concealing or destroying financial records, making a false oath, failing to provide the trustee with financial information, failing to satisfactorily explain the loss of assets and failing to obey court orders.
On the other hand, even if a person receives his or her discharge, certain debts are specifically excluded from the discharge. Debts such as domestic support obligations and certain tax debts are automatically excluded from the discharge (although there are many other categories of non-dischargeable debts). Other types of debts, require the court to determine whether they are excluded or not from the discharge. Those types of debts that require specific court determination may be subject to a dischargeability adversary proceeding.
Some types of debts that may not be dischargeable are:
- Debts that arose by false pretenses, false representations or actual fraud
- Debts that are not scheduled by the debtor
- Debts that arose by virtue of fraud or defalcation while acting in a fiduciary capacity
- Debts that arose by virtue of theft or embezzlement
- Debts that arose by a willful and malicious injury to another
The attorneys at Leiderman Shelomith Alexander + Somodevilla, PLLC can assist a debtor in defending these actions, or if you are creditor, can help pursue these types of debts.