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Debtor Refuses to Provide Tax Returns After Receiving Discharge, Court Finds Revocation of Discharge Is Appropriate

In a recent case, a bankruptcy court considered how a trustee should proceed when a debtor fails to provide requested information. In that case, the debtor filed a Chapter 7 petition before she filed her tax returns for the previous year. A creditors’ meeting was then held, and the creditor told the debtor to send him a copy of her tax returns when she filed them and to not spend any of the refund she received.

Sheet of MoneyThe debtor obtained a discharge about two months later, in April. By September, the trustee still had not heard from the debtor or received her returns. He then requested and received a court order requiring the debtor to bring copies of her returns. The debtor did not comply. The trustee then filed a motion to revoke the debtor’s discharge. The debtor did not respond. The trustee moved for default judgment, and the debtor still did not respond.

The court held a hearing for the debtor to show why she should not be held in contempt, and she still failed to respond or attend the hearing. Despite this, the court decided to deny the default judgment motion and dismiss the proceeding against the debtor. The judge said the trustee should have filed for contempt or attempted other means to compel the debtor before requesting to revoke her discharge. The trustee appealed the decision.

A bankruptcy appeals court reversed. The appeals court found the trustee was reasonable in taking steps to compel the debtor to provide information. The trustee did not need to delay the discharge, and he could file an adversary proceeding against her because she refused to comply with a court order. Thus, the court reversed and allowed the trustee to pursue a revocation of the debtor’s discharge.

Discharges in Bankruptcy

In bankruptcy cases, a discharge releases the debtor from personal liability for most debts incurred prior to filing. This means that the debtor does not have to pay the debts that have been discharged. In a Chapter 7 case, typically a court grants a discharge as soon as the time expires during which creditors and other parties in interest  may object to the discharge or file a motion to dismiss the case. This is usually about four months after the debtor files the bankruptcy petition. When a discharge is granted, the bankruptcy court will then mail a copy of the order of discharge to the debtor’s creditors and others involved in the case.

In Chapter 7 cases, the creditors and other parties in interest, including the trustee and the U.S. Trustee, may object to a debtor’s discharge by filing a Complaint, which is called an “adversary proceeding.” The court can deny a Chapter 7 discharge for a number of reasons, including failing to provide requested documents. The court can also revoke a discharge in some circumstances. For example, if a debtor is alleged to have obtained the discharge fraudulently, a trustee or creditors may request that the court revoke the debtor’s discharge.

Contacting a Bankruptcy Attorney

The complexity and ever-changing nature of the bankruptcy code warrants the need for strong legal representation. However, at Kruger & Schwartz, we will never make you feel pressured to obtain our services. We want you to be well-informed about your options and know what needs to be done the right way, the first time around. With our law firm, you never go through the process of filing for bankruptcy alone. We guide you through the entire process. To schedule your free initial consultation, call us toll-free at 866-366-3328 or contact us online.

More Blog Posts:

Bankruptcy Claim Rejected After Debtor Fraudulently Undervalued Real Estate Interest, Kentucky Bankruptcy Lawyers Blog, published April 6, 2017.

Debtor Prevented from Pursuing Personal Injury Claim Because She Did Not Properly Exclude it from Bankruptcy Claim, Kentucky Bankruptcy Lawyers Blog, published March 15, 2017.

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