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727 denial of discharge 01232014


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727 denial of discharge 01232014

  1. 1. By Gary Ray Fraley Of Fraley & Fraley California State Bar Certified Bankruptcy Law Specialist ©2014 Gary Ray Fraley Esq
  2. 2. Denial of Discharge under 727 1 Section 727 provides that a Chapter 7 discharge shall be granted unless a): 1) Debtor is not an individual - No discharge for Corporations & Partnerships 2) Acts to hinder, delay or defraud creditors, including transferring, concealing or destroying assets within 1 year before filing or property of the estate within 1 year after filing of the petition ©2014 Gary Ray Fraley Esq
  3. 3. 3) Acts to hinder, delay or defraud creditors, including transferring, concealing or destroying records 4) False oath, claim, attempt to obtain money or a promise of advantage by acting or not acting. Examples include: fraudulent transfer to 3rd party who gives it to an insider who promises to give control back to debtor or making promises like agreeing to make payments to a creditor simply to buy time before filing. ©2014 Gary Ray Fraley Esq
  4. 4. 5) Failing to explain missing assets 6) Refused to obey an order of the court or testify or invoked debtor's right against self incrimination and refused to testify after a grant of immunity, or refused on any other ground ©2014 Gary Ray Fraley Esq
  5. 5. 7) Committed an act in 2, 3, 4, 5, or 6 above within 1 year as to another case concerning an insider 8) Granted a Chapter 7 discharge in a case filed less than 8 years ago 9) received a Chapter 13 discharge with less than 100% to unsecured creditors (or 70% + good faith) in a case filed less than 6 years 10) as to 8 & 9 above, the bankruptcy court approves a waiver of discharge ©2014 Gary Ray Fraley Esq
  6. 6. 11) failed to complete the financial management course 12) potential felony criminal acts ©2014 Gary Ray Fraley Esq
  7. 7. 727(c) Who Can Object to Discharge 1) trustee, a creditor, or the United States Trustee may object to the granting of a discharge 2) on request of any party in interest, the court can order the trustee to determine whether grounds exist to deny discharge ©2014 Gary Ray Fraley Esq
  8. 8. 727(d) Grounds for Revocation of Discharge 1) revoke a discharge if it was obtained through fraud requesting party did not know of the fraud 2) failure to disclose and/or turn over a post-filing asset of the bankruptcy estate that is not disclosed as required 3) violated (a)(6) regarding failing to testify. 4) failing to explain a material misstatement in an audit. ©2014 Gary Ray Fraley Esq
  9. 9. 727(e) Who Can Request Revocation Of Discharge & Time Limits The trustee, a creditor, or the United States trustee may request a revocation of a discharge— (1) under subsection (d)(1) of this section within one year after such discharge is granted; or ©2014 Gary Ray Fraley Esq
  10. 10. (2) under subsection (d)(2) or (d)(3) [ Post filing estate assets] of this section before the later of— (A) one year after the granting of such discharge; and (B) the date the case is closed. ©2014 Gary Ray Fraley Esq
  11. 11. Notes re: 523 vs 727 A 523 action can be settled between the parties with a stipulated agreement. A 727 action must be served on the UST. You and the creditor cannot settle it between yourselves because the court and the UST can refuse to agree to the settlement. A basis for dismissal is an issue as to the integrity of the system so the Judge and the UST have a vested interest in determining if a denial of discharge is appropriate from their perspective. ©2014 Gary Ray Fraley Esq
  12. 12. Many creditor’s and debtor’s attorneys (and it seems, all pro-se creditors) do not know the difference between a 727 and 523. If you were representing a creditor the only time a 727 action makes sense for a creditor is if the creditor has no basis for a 523 claim. Knowing this you may use it to help your debtor client. ©2014 Gary Ray Fraley Esq
  13. 13. If you represent a debtor and a creditor’s attorney threatens a 727 action, you may be able to convince the creditor’s attorney that it would not be in his client’s the best interest to pursue a 727 denial of discharge action. Maybe the attorney does not want to end up helping all the other creditors by having their debts denied discharge as well as their clients debt. After all, do they want to be the only one at the dinner table or invite the whole world? ©2014 Gary Ray Fraley Esq
  14. 14. Consider your client’s true risk of denial of discharge under 727. It might be wise to make a deal with the creditor in a 523 action with a stipulated settlement. Then you can explain to your client how lucky they are to have hired you. Do you know what happens then? You get to ride off into the sunset like the old time hero in the Western movies with a happy client (and a bit of extra cash jingling in your pocket.) ©2014 Gary Ray Fraley Esq