In many cases, a Chapter 7 bankruptcy entitles individual debtors to a discharge of debts. This means that the debtor's obligations are erased and the debtor is no longer liable on the discharged debts. Similarly, a Chapter 13 debtor may receive a discharge when the debtor has completed all payments in the debtor's reorganization plan.
However, a discharge can be revoked in both Chapter 7 and Chapter 13 cases under certain circumstances.
Revocation of Discharge in Chapter 7 Cases
Section 727 of the Bankruptcy Code allows for revocation of the debtor's discharge in Chapter 7 cases in the following circumstances:
- Where the debtor obtained the discharge through fraud, and the party requesting the revocation did not know of such fraud until after the discharge was granted
- Where the debtor failed to report the acquisition of property that would constitute property of the bankruptcy estate
- Where the debtor has refused to obey any lawful order of the court
- Where the debtor has refused to respond to a material question approved by the court or to testify on the ground of privilege against self-incrimination, if the debtor has been granted immunity
- Where the debtor has refused to respond to a material question approved by the court or to testify on a ground other than the properly invoked privilege against self-incrimination
- The debtor has failed to explain satisfactorily a material misstatement in a Section 586(f) audit
- The debtor has failed to explain satisfactorily a failure to make available for inspection all necessary accounts, papers, documents, financial records, files, and all other papers, things, or property belonging to the debtor that are requested for a Section 586(f) audit
Section 586(f) authorizes the United States trustee for each district to contract with auditors to perform audits in cases designated by the United States trustee.
Based on any of these circumstances, the trustee, a creditor, or the United States trustee may request a revocation of discharge in a Chapter 7 case. Generally, the request for revocation must occur within one year after the granting of the discharge. However, in some cases the request must occur before the later of one year after the granting of the discharge or the date the bankruptcy case is closed.
Revocation of Discharge in Chapter 13 Cases
Section 1328 of the Code allows the court to revoke the debtor's discharge in Chapter 13 cases, if the debtor obtained the discharge through fraud, and the party requesting the revocation did not know of such fraud until after the discharge was granted.
Consequences of a Revocation
A revocation may result in:
- All debts which would have otherwise been discharged may be reinstated
- Creditors may initiate or resume collection of outstanding debts
- The debtor may be precluded from filing another Chapter 7 bankruptcy for at least six months after the date of the revocation
- The revoked bankruptcy filing may still appear on the debtor's credit report
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