Denial of Entire Bankruptcy Discharge

Debts In Bankruptcy Can Be Objected To Individually, Or The Entire Discharge Of All Debts

In bankruptcy, creditors may object to the discharge of the individual debts owed to them if one of the listed exceptions to discharge applies (for example, if the debt was incurred through fraud).   

But in a Chapter 7 or Chapter 11 case creditors or the bankruptcy Trustee may seek to have a debtor’s entire discharge denied if adequate legal grounds exist.

It is an oft-quoted maxim that the fresh start in bankruptcy is limited to the “honest, but unfortunate, debtor.”

Denial Of Entire Discharge Under Section 727 Of Bankruptcy Code

Bankruptcy code Section 727 (11 USC 727,) allows a creditor or party-in-interest to object to the discharge of all debts if certain criteria can be proved.  Among these are the following:

  1. The debtor, with intent to hinder, delay or defraud, transferred, destroyed, or concealed property within one year prior to filing the bankruptcy, or after the filing of the bankruptcy;
  2. The debtor concealed, destroyed, falsified or failed to keep and preserve books and records showing debtor’s financial position.
  3. The debtor knowingly made a false oath or account, presented a false claim, etc.

There are many more of these, which you can see by clicking on the 727 link above, but these are the main ones. It is more difficult to prevail on an objection to the debtor’s entire discharge than it is to object based on just a specific debt under section 523.

An objection to discharge requires going through a full trial, so it can be very expensive to defend.

Denial of Discharge Does Not Stop Trustee From Liquidating Assets

To make matters potentially worse, having one’s discharge denied does not affect the administration of the bankruptcy case. The Trustee in a Chapter 7 case can and will continue to liquidate (sell) any non-exempt assets of the debtor and pay the creditors.

Thus, it is extremely important to be accurate and honest on the information given on the bankruptcy petition and schedules, as well as to be filing the bankruptcy case in good faith.