When Can the Court Revoke a Bankruptcy Discharge?
While debtors may feel like they are home free once they receive a discharge in bankruptcy, under certain circumstances the court can revoke discharges. The legal concept behind revocation is to see that justice is served, and when the court suspects that a debtor obtained a discharge dishonestly, that discharge is simply not set in stone.
Situations where bankruptcy courts consider revoking bankruptcy discharges include allegations of:
- Fraudulently obtained discharges
- Failure to disclose property acquisition that should have been part of the bankruptcy estate
- Acts of impropriety under section 727(a)(6) of the Bankruptcy Code, such as refusing to obey lawful court orders or refusing to respond to a material question approved by the court
- Failure to explain misstatements discovered by a bankruptcy case audit
- Failure to provide information or answer questions requested by a bankruptcy case audit
Who can request a discharge revocation?
Persons who may request that the court revoke a discharge include the U.S. Trustee, a bankruptcy trustee, or a creditor.
There is a difference between a bankruptcy trustee and a U.S. Trustee. The court assigns a specific bankruptcy trustee to each bankruptcy case. The bankruptcy trustee oversees liquidation in Chapter 7 and approves repayment plans and delivers payments to creditors in Chapter 13 bankruptcies. The trustee also attends the 341 (or creditors') meeting where debtors, lawyers, and creditors question and discuss the debtor’s finances and debts.
In contrast, a U.S. Trustee is an officer of the Justice Department who more broadly oversees bankruptcy case administration, which includes monitoring creditors' committees and preventing bankruptcy fraud.
An experienced bankruptcy attorney can advise you each step of the way and help you avoid the pitfalls that lead to discharge revocation.