If you qualify for Chapter 7 bankruptcy and decide to go through with it, you should understand exactly how it works and what to expect from it before you sign the paperwork it requires. Knowing what to expect is important, and one thing you should talk to your lawyer about is the potential for your creditors to challenge your bankruptcy case.
What does it mean if creditors challenge your case?
When you file for this branch of bankruptcy, you will be required to appear at a hearing that is called a 341 meeting of the creditors. This meeting is designed to give your creditors a chance to object to a discharge of the debt you owe them, and they will all be invited to this meeting to have this opportunity. If they do not come, they likely will lose out on the chance to object to your bankruptcy, which is good for you. When creditors object, they are challenging the legitimacy of a discharge of your debt. In other words, they are saying that they do not believe the court should discharge the money you owe them.
Why do creditors challenge cases?
Creditors will typically only challenge cases when they have good reasons to do so, and typically the reasons will involve fraud. For example, if you charged $5,000 of electronics the month before you filed for bankruptcy, your creditor might view this as highly suspicious. After all, you are buying all these things knowing that you will be filing for bankruptcy. This is illegal, and this would be a reason a creditor would challenge your discharge of this debt.
What should you expect during your case?
If you have not committed any type of fraud with your finances, it is unlikely that creditors will show up to this meeting. Your creditors are fully aware of the laws and rules, and they know your rights. They will not challenge a case unless there is good evidence to back up their side, as they know they cannot win without the right evidence. Therefore, you will likely see no creditors as this meeting unless you did something wrong.
While it is uncommon that creditors will challenge a person's bankruptcy case, it does happen from time to time. There are ways to ensure that you will not have to deal with this, and you should talk to a bankruptcy lawyer to learn more about it.