Objections / Dismissal

[jp2861]

If one creditor objects and is successful in proving fraud is it possible for the trustee to dismiss the entire filing based on fraud. I've read numerous times that the case will continue and all other creditors will be discharged. However, today I was told different. If someone knows where this is addressed in the bankruptcy laws I'd appreciate it. I'm looking for something written in stone that says what happens if one creditor proves fraud, and what happens to the remaining creditors and the case in general.

[HHM]

You have to understand what creditors can object too...they can only object to the dischargeability of the debt you owe that creditor. Those objections typically arise under Section 523(a)(2). That right to object under Section 523(a)(2) only belongs to the creditor.

The trustee can dismiss your case for any number of reasons, but none of the reasons have anything to do with whether a particular debt can be discharged regardless of the reason for the discharge. Dismissal of a BK case usually pertains to asset related fraud (i.e. hiding assets) or just general non-compliance with the BK code by the Debtor (not attending credit counseling, not turnover requested documents etc). Keep in mind, the BK trustee, especially if there are non-exempt assets, does NOT want to dismiss your case. That is where the US trustee comes in...the US Trustee has the power to dismiss your case, but that has more to do with serial BK filings, means test issues, expenses, and whether the US trustee things the debtor is trying to abuse the BK system. But again, those issues have nothing whatsoever to do with whether a particular debt can be discharged under section 523(a)(2) of the BK Code.

[jp2861]

That section doesn't address what I asked. I guess what I'm looking for is something that gives a line by line process of what happens when a creditor objects to the dischargeability of that certain debt. Such as, who does the creditor object to? And what happens step by step after that.

[HHM]

You are asking too much of the code.

First, some backdrop.

When a debtor files BK, the court assigns both a BK Judge and a BK Trustee. So, from the very beginning of a BK, your case is assigned a specific Judge.

The actual procedure goes like this.

The creditor files an Objection "at" the BK Court Clerk (filed electronically).
Thus, the objection is filed to the BK Court.
The debtor is given "xx" amount of days to respond...i.e. to oppose the objection (I believe it is 30 days)
When the objection is filed by the creditor, a hearing is set before the BK court. That is the date of the "mini" trial that is held before the BK Judge assigned to the case.

The BK trustee and the US trustee are not even party to the dispute.

The "nuts and bolts" of what happens is based on the Federal Rules of Civil Procedure and the Federal BK Rules of Procedure...i.e. If the objection cannot be settled, then the lawyers will have a scheduling conference to outline a discovery plan, deadlines for pre-trial motions, etc. which gets submitted to the court along with other stuff that is really beyond the scope of this forum.

If you are really interested, you will want to look at Part VII of the Federal Rules of Bankruptcy Procedure which describes Adversary Proceedings. http://www.law.cornell.edu/rules/frbp/#part_vii

Haven't we been down this road already...honestly, even if you read all the rules and code, I doubt you would get an answer to your question...and I am not sure what you are trying to ask. Knowing the actual procedure is of little value to the debtor because BK procedure is all automatic. Instead of worrying about "how" an objection works, the questions you should be asking is whether you are likely to be the victim of an objection, and that is something the collective knowledge on this forum can assist you with if you provide enough information. If you really want to see "cases" on objections, go to the library and find an "annotated" copy of the Federal BK Code and read the footnotes for Section 523(a)(2)...annotated versions of legal codes contain case law excerpts that have cited the specific statute.

[JollyGG]

To add to what HMM said - The creditor who plans to object usually contacts your lawyer first to see if something can be worked out before any actual objections are filed. When they contact your lawyer you can make several decisions based on your lawyers experience and advice. 1. Ignore them and see if they actually file an objection, 2. Settle the debt (I think most people manage to settle for about 50% paid over six to twelve months, 3. Reafim the debt, 4. Have your lawyer send back a letter saying why the debt is dischargable and then wait to see if the actually file an objection.

Objections don't come out of the blue. As HMM said the creditor has to have a reason to object. You usually know an objection is coming before it happens.

[HHM]

You usually know an objection is coming before it happens.

That really is the bottom line. Finally, most objections rarely see the inside of a court room. As Jolly points out, most are resolved in one of two ways, (1) the debtor settles with the debtor (2), if the strength of the creditors case is questionable, the debtor will call the creditors bluff and do nothing...and the creditor fails to object.

Also, just one last thing on the procedure, the creditor only has up until 60 days from the date of the first scheduled 341 meeting to file an objection.