Written by Craig D. Robins, Esq.
Objections to a bankruptcy discharge in a typical New York bankruptcy case are relatively rare. Technically, a creditor has the right to file objections if they feel the debtor engaged in fraudulent conduct regarding the way a debt was incurred, such as lying on a credit application.
A creditor can object to a bankruptcy discharge by filing a lawsuit within the bankruptcy called an adversary proceeding. However, very few creditors will consider bringing an adversary proceeding, even if grounds for doing so exist.
Here are three reasons why:
1. There were a number of cases earlier in the decade which raised the burden of proof that a credit card company or bank must show the bankruptcy court in order to prevail.
2. Adversary proceedings are not cheap. The creditor has to pay a court filing fee of several hundred dollars and they also have to hire bankruptcy counsel.
3. The judges in our district have very burdensome chambers rules for adversary proceedings which require an exceptional amount of work on the part of the bankruptcy attorney. The court expects the lawyers to do the same amount of legal work whether the case involves a $5,000 consumer credit card debt or a $1,000,000 Chapter 11 turnover action.
Keep in mind that creditors, in recent years, have filed far fewer adversary proceedings in consumer bankruptcy cases in New York. Nevertheless, if they believe firmly enough in their position, they may still seek relief.