Can Creditors Object To Your Bankruptcy Case? Why And How
Bankruptcy may not be an enjoyable process, but it provides permanent and wide-ranging protection when you need it. As you prepare to receive the financial fresh start that comes from having some or all of your debts discharged, though, you'll face one potential hurdle: the creditors meeting. This meeting, known as a 341 meeting, allows your creditors to object to some aspect of your bankruptcy case.
Why are creditors allowed to object? Why might they object? And how can you respond? Here's what you need to know.
Why Creditors Can Object
The 341 meeting is specifically designed to provide your creditors with a convenient forum in which to air any concerns about your bankruptcy plan. While bankruptcy is a positive resolution for you, it may be a negative one for your creditors. Their cooperation is fundamental to the success of the bankruptcy system as a whole, so one of its duties is to look out for their interests as well as the debtors'.
The Main Reasons for Objections
Most creditors do not object to bankruptcy cases because it's often more trouble than it's worth. But there are a few broad reasons why someone might object during your 341 meeting. The most common is if they believe fraud is involved. For instance, if you took out a big loan right before filing with no intention of repaying it, the lender may object to the discharge of that debt.
A second reason for objections is if the debt resides in a legal gray area where it may or may not qualify for discharge. For instance, income tax debts may be dischargeable if they fall within a specific time frame. If the tax agency argues that the debt was generated outside that time frame, it may not be discharged.
Third, you generally cannot have debts discharged if they are the result of willful or malicious actions on your part. If you intentionally destroyed your ex's car and they got a judgment in court for damages, the plaintiff may appeal to the trustee to have their debt upheld as a result.
Finally, creditors with a personal interest may show up and cause trouble just for spite. This most often occurs if you owe money to a relative, divorced spouse, estranged friend, or vindictive ex, for instance. These objections are unlikely to come to anything but they make the meeting uncomfortable and stressful.
How to Fend Off Objections
If you worry that a creditor might object to your bankruptcy, start preparing the best defense now. Meet with an experienced bankruptcy attorney in your state to learn how.
For more information, contact a bankruptcy attorney near you.
