How Often Do Creditors Object to Chapter 7?

Filing for Chapter 7 bankruptcy can offer much-needed relief from overwhelming debt, providing a fresh financial start for individuals and families. However, sometimes creditors can object to the discharge of certain debts during the bankruptcy process.

While objections are relatively rare, they can complicate the path to financial freedom. How often do these objections occur, why do they happen, and why can having a bankruptcy attorney help protect your rights if a creditor challenges your case?

How Common Are Creditor Objections in Chapter 7?

In most Chapter 7 bankruptcy cases, creditor objections are uncommon. According to the U.S. Courts, the majority of Chapter 7 cases are classified as “no-asset” cases, where the debtor has no property that creditors can claim for repayment. In these cases, creditors typically have little incentive to object because they’re unlikely to recover much, if any, of the debt owed to them.

However, objections may arise in cases where there is suspicion of fraud or dishonesty. Creditors also raise objections when they don’t want a specific debt discharged. Common examples include debts from recent luxury purchases, cash advances, or any conduct that suggests the debtor acted in bad faith. While these situations are relatively rare, they can still lead to objections that must be addressed in bankruptcy court.

Why Creditors Object to Chapter 7 Discharges

There are a few specific reasons why creditors might object to a discharge in Chapter 7:

• Suspected Fraud: If a creditor suspects that the debtor has engaged in fraudulent behavior, such as transferring assets before filing, lying about financial information, or accruing debt without the intent to pay, they may object. The law prohibits discharging debts obtained by fraud, so the courts take these objections seriously.
• Non-Dischargeable Debts: Some debts, like certain tax obligations, student loans, child support, and alimony, are automatically non-dischargeable in Chapter 7. However, if a creditor believes that a debt could be classified as non-dischargeable for a specific reason, they may file an objection to prevent it from being wiped out.
• Luxury Purchases or Cash Advances: The Bankruptcy Code specifies that debts for “luxury goods or services” totaling over $725 made within 90 days before filing are presumed to be non-dischargeable. Likewise, cash advances over $1,000 taken within 70 days of filing may also raise flags. If a creditor suspects misuse, they can object to prevent the discharge of those specific debts.

Why You Need a Bankruptcy Attorney if a Creditor Objects

If a creditor files an objection to your Chapter 7 bankruptcy, having an experienced bankruptcy attorney can be essential. Here’s why:

• Understanding Legal Requirements: Bankruptcy law is complex, and responding to a creditor objection requires detailed knowledge of legal procedures and evidence requirements. An attorney knows what documentation and arguments you need to counter the objection and can represent you in court if necessary.
• Protecting Your Rights: Creditors may pursue objections aggressively, and without representation, you may not be fully aware of your rights. A bankruptcy lawyer can defend your position, ensuring you have the strongest possible argument in your favor.
• Reducing Stress and Improving Outcomes: An attorney can help you navigate the process more smoothly, improving your chances of a favorable outcome and ensuring that you remain compliant with bankruptcy laws.

Speak with an Attorney

While creditor objections in Chapter 7 bankruptcy are not common, they can complicate the process and delay your discharge if they occur. Partnering with a knowledgeable bankruptcy attorney can make a significant difference in protecting your rights and achieving a smooth, successful discharge of debt.

If any of your creditors are questioning your bankruptcy filing or you’re concerned that this could happen, contact the Law Offices of Robert M. Geller for more information.