With most unsecured debts in Chapter 7 Bankruptcy, there is a presumption in favor of discharging the debt in bankruptcy. The presumption in favor of discharging the debt in Chapter 7 Bankruptcy goes against the back drop of a creditor’s right to object to discharge under Section 523 of the Bankruptcy Code.
Creditors cannot just object to debtor discharging their debt for any reason- or every one of debtor’s creditors would. Instead, Section 523 of the Bankruptcy Code limits the creditor’s reasons to object to the discharge of a debtor’s debt with them to just a few reasons.
By far and away the single biggest reason a creditor objects to debtor discharging a debt with creditor is found under Section 523(a)(4). The statutory basis under 523(a)(4) is fraud. There are simply too many examples of fraud to count but here are a few. First, debtor applies for a credit card and says he/she makes 100k a year when, in reality, debtor earns 20k. Second, and the more common example, is where debtor uses the credit card without the intent to repay the debt.
For example, debtor has 12k in credit left on a credit card so debtor feels free to help themselves to the credit and use the card to fly to Hawaii, knowing that they don’t intend on repaying the debt. Not only is this fraud but outright theft. Once you know you intend to file bankruptcy, all credit card use should immediately stop. If it doesn’t, you may be faced with a creditor objecting to you discharging that portion of debt with them.
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