Can Your Bankruptcy Discharged Be Revoked? How You Can Lose Debt Protection After the Fact

Honesty is the best way to keep your discharge from revocation

Image Source: Flickr User toffehoff

When you file for a Chapter 7 bankruptcy, you get the fastest and most complete debt relief possible under US law. However, part of the covenant of the protection is that you are completely honest with the court. If your are shady with the Trustee, submit phony documents or lie to the court, you can be denied a discharge or have your case dismissed with prejudice. You can even be subject to criminal charges for defrauding creditors and the court. But did you know your bankruptcy discharge can be revoked after the fact in some cases?

The bankruptcy discharge is not written in stone

You may think once you have that court order in your hand discharging your eligible debts in a Chapter 7 bankruptcy that you are 100% in the clear. In most cases, this is true. But if you were deceptive at some point in the process, the court may call shenanigans on you. It's usually not the court that starts a revocation process, it's an interested third party, typically a creditor who alleges that you have applied for bankruptcy protection fraudulently.

How long does a creditor have to complain about a Chapter 7?

Once you file for Chapter 7 bankruptcy, all of your creditors listed in the petition are sent a notice that you have filed. Within a four to six weeks after you file, you must attend your 341 Meeting of Creditors. Typically, creditors do not show up to this meeting. The creditors and Trustee then have 60 days from this meeting to file a complaint to the court. If there are no complaints filed during this window, your discharge will be issued.

How long does a creditor or Trustee have to request a revocation of discharge?

From the date of the discharge from the court, a clock starts ticking. Creditors or the Trustee in your case have one year from that date to request that your discharge be revoked. The law states that a revocation can be requested if there was “fraud of the debtor, and the requesting party did not know of the fraud until after the granting of such discharge.” They revocation request asks that your discharge be taken back and that the bankruptcy case reopened.

What are the grounds for a revocation of discharge?

Fraud and dishonesty in the filing are common reasons for a Trustee or creditor to request that your discharge be set aside. Usually, requests are made for these specific reasons:

• You inherited assets within 180 days after the discharge and failed to report it to the court
• You refused to obey a lawful order of the court or answer a material question about the case
• You fail to cooperate with an audit conducted by the Trustee assigned to your case
• You fail to explain a “material misstatement” in your filing
• You refuse to provide “necessary accounts, papers, documents, financial records” for review

In the case of audit misconduct, the window to request a revocation of discharge may be even longer and the law does not specify a limit. It is very rare for creditors to request a revocation of discharge – it's more likely that it would be the Trustee assigned to your case who would request it. These requests, in general, are rare. The best approach is to be completely honest and transparent in your dealing with the Trustee and court in your bankruptcy filing.

To find out more about the debt relief offered by Chapter 7 bankruptcy, contact the Law Offices of John T. Orcutt for a free consultation. Call +1-833-627-0115 for a free bankruptcy consultation in Greensboro, Raleigh, Fayetteville, Garner, Wilson or Durham. Ask about our zero down bankruptcy specials.