I CAN'T DISCHARGE THAT? WHY FILE BANKRUPTCY?
I CAN'T DISCHARGE THAT? WHY FILE BANKRUPTCY?
Bankruptcy is a federal debt relief program that is provided for in the Constitution. Our founding fathers understood that allowing honest but unfortunate debtors the ability to get rid of some or all their debts would help keep the economy bustling by clearing out old unpayable debts. And it was preferable to the debt relief program back in those days – debtor prisons for those that could not pay.
What is Bankruptcy?
Millions of Americans file for bankruptcy relief every year. Most debts can be eliminated through a discharge order issued by the bankruptcy court, such as credit cards, personal loans, medical bills, and judgments to name a few. Certain debts are automatically excluded from the discharge order and will not go away, debts such as spousal or child support, most taxes, student loans, fines, restitution, and similar types of debts. Other debts can be determined to be non-dischargeable by the bankruptcy judge.
What Happens When a Bankruptcy Case is Filed?
When a bankruptcy case is filed, creditors are notified in writing of several important dates such as the date the case was filed, the date the meeting of creditors will be held, and the deadline to file an objection for certain debts. Typically, the deadline to file a complaint to discharge is 60 days after the first date set for the meeting of creditors.
Non-dischargeable Debt – When a Bankruptcy Can Be Denied
The type of debts that can be objected to generally involve conduct that results in a debt that is inappropriate for discharge. The debtor will still receive a discharge order eliminating the remainder of their debts that are dischargeable. Debts that can be excepted from discharge if the complaint is filed timely and the judge agrees with the objection include:
- Money, property, services, or credit obtained by
- False pretenses
- False representation
- Actual fraud
- False financial statement
- Luxury goods or services worth over $725 incurred within 90 days of filing
- Cash advances over $1,000 incurred within 70 days of filing
- Fraud or defalcation while acting in a fiduciary capacity
- Willful and malicious injury
A harsher objection can also be filed against the debtor requesting that a discharge order be denied altogether, meaning that no debt relief is obtained at all. This type of objection typically occurs after extremely prejudicial acts by the debtor and is designed to protect the integrity of the bankruptcy process. These objections include but are not limited to:
- Intent to hinder, delay or defraud by the debtor in the year prior to filing bankruptcy or any time after the case is filed
- Failure to keep, or to conceal, falsify or destroy books and records related to the debtor’s financial condition or business affairs
- Concealment of assets
- Lying under oath
- Bribery (attempted or actual)
- Failure to turn over property or information
- Failure to satisfactorily explain loss of assets
- Failure to obey an order of the court
Bartenwerfer v Buckley – Debts Due to a Partner’s Fraud are Non-dischargeable
The Supreme Court recently ruled that sometimes a debtor can be found to have incurred a debt that is non-dischargeable even though the wrongful act was committed by a co-debtor. In Bartenwerfer v. Buckley, 598 U.S. 69 (2023), the debtor and her then boyfriend had a legal business partnership to renovate a house to flip for profit. The boyfriend committed fraud in the course of selling the house, and the buyers later sued both partners. Even though the state court found that the debtor had neither knowledge of nor participated in the fraud, the buyers were still granted judgment against them both because of the partnership. When she later filed for bankruptcy, the buyers objected to the discharge of the debt due to fraud. The Supreme Court held that the fraud exception does not require proof of intent by the debtor, only proof that the debt was incurred by fraud. Thus, the legal partnership with the fraudster was sufficient to make the debt non-dischargeable against the debtor, even though she did not participate in the fraudulent acts.
How to File Bankruptcy
McConville Considine Cooman & Morin’s Bankruptcy Lawyers in Rochester have the expertise to assist both debtors and creditors in all aspects of bankruptcy. Our Bankruptcy Attorneys have decades of experience representing people and companies in bankruptcy court and can assist you with your financial issues. Whether you have debts that need to be addressed or someone who owes you money and has filed for bankruptcy, we can help guide you through the bankruptcy process from start to finish. As a federally designated Debt Relief Agency, we assist people and companies with finding solutions to their debt problems, including, assisting them with the filing of petitions for relief under Title 11 of the United States Bankruptcy Code. Contact us for more information.
This publication is intended as an information source for clients, prospective clients, and colleagues and constitutes attorney advertising. The content should not be considered legal advice and readers should not act upon information in this publication without individualized professional counsel.
McConville Considine Cooman & Morin, P.C. is a full-service law firm based in Rochester, New York, providing high-quality legal services to businesses and individuals since 1979. With over a dozen attorneys and a full paralegal support staff, the firm is well-positioned to right-size services tailored to each client. We are large enough to provide expertise in a broad range of practice areas, yet small enough to devote prompt, personal attention to our clients.
We represent a diverse range of clients located throughout New York State and New England. They include individuals, numerous manufacturing and service industry businesses, local governments, and health care professionals, provider groups, facilities and associations. We also serve as local counsel to out-of-state clients and their attorneys who have litigation pending in Western New York courts. For more information, please contact us at 585.546.2500.