An experienced Denver bankruptcy lawyer, David M. Serafin will specifically advise you as to which debts you can discharge under the Bankruptcy Code.
Section 523 outlines debts which automatically survive bankruptcy without the need for a creditor to file an objection. Such debts include the following:
- Priority Taxes – A tax debt will be non-dischargeable if a tax return was not filed at all or filed two years or less prior to the bankruptcy filing date, and/or if the tax year is not three years or more previous. An IRS Assessment needs to have occurred over 240 days prior to the filing date. Also non-dischargeable are payroll, employment and property taxes.
- Debts Not Listed – An unlisted debt typically results in a creditor not receiving notice of the bankruptcy case. As such, an unlisted creditor is not enjoined by the Automatic Stay provisions prohibiting any collection activity in either chapter 7 or chapter 13. (The one exception is this rule – at least in Colorado - is that unlisted debts can be discharged in a “no asset” chapter 7 because there’s no non-exempt property for the trustee to distribute to unsecured creditors.)
- Domestic Support Obligations – Examples are child support or spousal maintenance but property settlement awards or other orders in a divorce decree may be discharged in chapter 13.
- Government Penalties and Fines – Assessed as a penalty as opposed to compensation for monetary loss.
- Student Loans – Unless the debtor meets to extremely difficult standard of “Economic Hardship” (e.g. permanent disability without the possibility of ever paying back the student loans).
- Injuries or Death Due to Influence of Drugs or Alcohol – This section expressly does not include liability for property damage, which can be discharged, and
- Criminal Restitution Awarded in Federal Court.
Conversely, a creditor needs to either file an Adversary Proceeding or object to discharge of the following debts in Colorado Bankruptcy Court:
Fraudulently Incurred Debt – A creditor establishing that it justifiably relied upon the debtor’s fraudulent misrepresentation of a material fact resulting in injury establishes a presumption of fraud, which can be rebutted by the debtor by showing that no fraud took place.
However, the majority of creditor objections on this ground concern one of the two following situations in which no showing of fraudulent intent is required: (1) within 90 days of the filing, the debtor(s) incurred over $550 for luxury goods or services from a single creditor (medical bills incurred will overcome this fraud presumption), or within 70 days of the filing, the debtor(s) received a cash advance of over $825 from a single creditor.
- Debts Resulting from Larceny, Embezzlement or Breach of Fiduciary Duty – Creditor claims on this ground almost always come from shareholders, partners or creditors litigating with one another in the context of a failed business.
- Debts Resulting from Willful or Malicious Conduct – this does not include negligent behavior.
It should be noted that chapter 7 will continue to proceed (meaning that the 341 Meeting of Creditors in Colorado Bankruptcy Court will still be held and the debtor will receive a discharge) even if the creditor files an Objection to Discharge and/or an Adversary Proceeding regarding the particular debt at issue. Such objection typically needs to filed within 60 days of the Meeting of Creditors, unless the creditor can show that it was not properly notified of the filing.
On the other hand, a creditor objection in chapter 13 may prevent confirmation of the plan if not timely resolved. For this reason, a creditor will usually file a written objection (and a Proof of Claim), even for Section 523 debts which automatically survive the bankruptcy, in order to preserve its claim – and a right to part of the monthly plan payments.
If the creditor’s objection is ultimately successful, the debt (plus appropriate interest) will be non-dischargeable.
The Law Office of David M. Serafin will advise you of your rights when dealing creditors who object to discharge. An experienced Denver bankruptcy lawyer who has successfully defended numerous Objections to Discharge, David M. Serafin will fight to ensure that you discharge the full amount of debt possible.