Question

When and under what circumstances can a discharge in bankruptcy be revoked? What is the effect of such revocation?

Answer 1

WHAT IS BANKRUPTCY DISCHARGE?

A bankruptcy discharge frees a debtor from personal liability to pay any debts that are legally discharged. In other words, the debtor is no longer legally required to pay certain types of specified debts. The discharge is a permanent order prohibiting the creditors from any form of collective action on discharged debts, including legal action and communication with the debtor.

WHO CAN REVOKE A BANKRUPTCY?

In most of the cases the revocation request will come from:

• The bankruptcy trustee
• A creditor
• The US Department of Justice

WHEN CAN A BANKRUPTCY DISCHARGE BE REVOKED?

In Chapter 7bankruptcy, an interested party must request a revocation within one year after the discharge is granted, or the case is closed, whichever is later. In Chapter 13 bankruptcy, an interested party must file a revocation petition within a year after the discharge is granted.

CIRCUMSTANCES UNDER WHICH DISCHARGE CAN BE REVOKED?

CHAPTER 7 BANKRUPTCY

If a debtor filed for Chapter 7 bankruptcy, the bankruptcy trustee, the US Department trustee, or the creditor could ask the court to revoke the discharge if a debtor:

• Committed bankruptcy fraud
• Concealed property
• Failed to comply with court orders
• Couldn't explain the loss of assets

CHAPTER 13 BANKRUPTCY

In Chapter 13 bankruptcy, a discharge can be revoked if a debtor:

• Committed the fraud in obtaining a discharge, and
• the party requesting revocation did not become aware of the fraud until after the discharge was granted.

EFFECTS OF SUCH REVOCATION

If a discharge is revoked:

• Debtor's debts are reinstated as if the bankruptcy case had never taken place.
• The assets cannot be used by the debtor to pay for defense or settle claims because the bankruptcy trustee still administers the debtor's assets.
• The debtor is still responsible for any unpaid debts to creditors.