Can Creditors Object To A Bankruptcy?

Whether it is about the creditors or about the debtors, bankruptcy is not a welcome decision for either party. Still, if we look at the overall picture, it looks like a debt relief for debtor and a financial loss for the creditors. That is the reason the US bankruptcy laws have also provided certain options for the creditors to object to a bankruptcy. If you are a creditor and you think you are going to be in loss if the debtor is granted bankruptcy and the debts eventually get discharged. However, you will have to convince the court with a valid reason. Just saying that the debtor is not making the payments to you intentionally is not going to do any good. The court requires you to provide better reasons. Following is a brief rundown on it.

Attend The Meeting Of Creditors

As per section 341, when a bankruptcy petition is filed, the court assigns a date for meeting of creditors. The debtor and a bankruptcy trustee also join this meeting. In this meeting, the trustee and creditors get an opportunity to ask questions regarding the financial position of the debtor. All the questions must be answered by the debtor under penalty of perjury and under oath. After this meeting, you will be in a better position to decide whether you have any ground to object to a bankruptcy.

Look Out For Your Options Under The Section 523

The US laws have specified a detailed list of the grounds, which can be used to file an objection against a bankruptcy filing by a debtor. You can get this detailed list under Section 523 of the bankruptcy code. For example, a possible ground is that the debtor had already decided to file for bankruptcy and still borrowed money from you. Such activities are legally considered as fraud, especially if the money was borrowed within ninety days prior to filing bankruptcy. You will have to file an adversary proceeding to object debt discharge under Section 523. You will have to clearly mention in your appeal that which specific sub section of this section you think has been violated by the debtor.

You may also find some grounds under section 707 to object to a bankruptcy. Under this section, the creditors get the right to file their objection alleging that the debtor is misusing the provisions of chapter 7 bankruptcy. Such cases are referred to as the cases of abuse of chapter 7.

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Posted in Bankruptcy, Filing Bankruptcy | 1 Comment »

One Response to “Can Creditors Object To A Bankruptcy?”

  1. John says:

    Bankruptcy may come like a big financial loss for the creditors that’s why US Bankruptcy laws have given some strong ways for Creditors to save themselves. But, the laws can help you only if you can put some strong convincing grounds before the court regarding the debtor. You have to provide some strong reasons. The court will arrange a meeting for creditors; the meeting will also be a place for the debtor and a bankruptcy trustee to meet each other. Here, you can ask questions from the debtor regarding financial position of the debtor. The trustee will also ask some questions to the debtor and debtor will have to answer all the questions under the penalty of perjury and under oath. When you listen the answer of the debtors, you will get an idea, what do you want to do in the coming proceedings. A creditor can also look for some other options under the section 523. The US laws have given a list of the grounds which ca be used to object bankruptcy filing by a debtor. There are so many grounds under which you can object the bankruptcy; one example is if debtor has borrowed money from you within ninety days before filing for bankruptcy.

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