Creditors May Object to Bankruptcy Proceedings but Rarely Do Says Des Moines Bankruptcy Lawyer
Des Moines, IA (Law Firm Newswire) January 30, 2012 – Creditors have the right to challenge bankruptcy discharges. However, many of them do not.
“More often than not, creditors do not tend to challenge Chapter 7 bankruptcies, largely because they prefer to challenge business bankruptcies because there is more at stake for them,” said Kevin Ahrenholz, a Des Moines bankruptcy attorney in Iowa.
There are some circumstances that cause creditors to file a challenge. For instance, if the debtor ran up a large credit card bill six months before filing for bankruptcy, they may feel they had been deliberately cheated by a debtor who was planning to declare bankruptcy. Another reason for a creditor to challenge a filing is if the debtor misrepresented their financial affairs.
Facing a creditor challenge is not something to be particularly worried about, as in most instances something may be worked out. An example would be if the creditor objects to the discharge of a large debt, and wants to negotiate a partial payment plan for the debt or part of the debt. An alternative can be to convert the case from a Chapter 7 to a Chapter 13 bankruptcy, which would then result in a court-ordered repayment plan over a period of several years.
It usually is not representatives of large credit card companies that file a challenge. It is individuals that lent the debtor money or a local business creditor that extended credit to the person seeking bankruptcy protection.
There are some instances where a creditor may file a lawsuit within the bankruptcy, objecting to the discharge of the debt. This is referred to as an adversary proceeding, which generally arises because the creditor feels there has been fraudulent behavior on the part of the debtor. An example would be that they lied on a credit card application.
In a great number of cases, a creditor will not challenge a bankruptcy because they do not want to pay court costs and lawyer’s fees. However, if there is a great deal of money at stake, they may consider challenging the discharge as a business decision on the off chance they may recover some of their debt.
Kevin Ahrenholz is an Iowa bankruptcy lawyer and Iowa bankruptcy attorney. To contact an Iowa bankruptcy attorney, Iowa bankruptcy lawyer, or set up an appointment, visit http://www.iowachapter7.com or call 1.877.888.1766.
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Des Moines, IA 50309
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