When Can You Object to a Debtor’s Chapter 7 Debt Discharges?

 Posted on February 25, 2025 in Bankruptcy

If a customer who owes you money has filed for Chapter 7 bankruptcy, you may be concerned about the likelihood that you will be paid back for this debt. After all, your business’s bottom line is affected when customers do not pay what they owe.

The bankruptcy process has clear rules about how secured and unsecured creditors get paid in bankruptcy. Additionally, in most cases, a debtor’s debts are discharged in bankruptcy, meaning that bankruptcy cancels the debtor’s obligation to pay. 

Yet there are times when you have legal recourse to object to the discharge of one or all of the debtor’s debts in Chapter 7. An experienced Chicago, IL creditor’s rights attorney can provide advice on whether and how you can object to the discharge of one or all of the debtor’s Chapter 7 bankruptcy debts. 

How Can a Creditor Object to a Chapter 7 Discharge?

In most cases, in order to object to a discharge in Chapter 7 bankruptcy, a creditor will file an adversary proceeding. However, in a situation where you are objecting to the discharge on the grounds that a discharge has already previously been granted on a debt, you will file a motion objecting to discharge with the court. This motion must be filed within 60 days of the debtor meeting with the creditors. 

What Are the Grounds for Objecting to Chapter 7 Discharge?

Fraud 

If a debtor has acted fraudulently in bankruptcy, a creditor can object to the bankruptcy discharge, meaning the discharge of all the debts. Fraudulent actions that may be grounds for objecting to a Chapter 7 discharge include concealing assets from the bankruptcy estate, making false statements under oath, or lying on the bankruptcy application. 

Additionally, fraudulent transfers can be grounds for objecting to the discharge. A fraudulent transfer occurs when the debtor transfers assets to a third party in the time leading up to the bankruptcy filing to hide that money so it is out of reach of bankruptcy.

Wrongdoing or Illegal Conduct

If the debt is the result of intentional or malicious conduct, such as the repair costs for the debtor’s willful destruction of a company, a creditor can ask that this debt not be discharged. Likewise, a creditor can object to a debt that stems from a debtor’s illegal action, such as damages caused while driving under the influence. 

Legally Nondischargeable Debt

Some debts are legally nondischargeable, such as alimony, child support, and certain tax debts, but it is not always clear that a debt falls into this category. A creditor can object to a discharge of a particular debt on the grounds that the discharge sought is nondischargeable. 

Call a Chicago, IL Debtor’s Rights Attorney

At Dimand Walinski Law Offices, P.C. we defend the right of creditors to get paid. Our experienced Chicago, IL debt collection attorneys represent creditors against debtors in bankruptcy adversary proceedings. Call our offices at 312-704-0771 for a consultation.