We have blogged on this topic before. The general consensus in the Bankruptcy Code favors discharging unsecured debt. However, there are reasons why creditors can object to you discharging a debt with them and they are contained in Section 523 of the Bankruptcy Code. Generally, a creditor has the burden of proving that the debt owed to them is not dischargeable, say under Section 523(a)(4) of the code for fraud.
For a creditor to prove fraudulent intent is not always easy. How do you prove what is on someone’s mind? Sometimes, the fraud can be so overt that it is obvious to a layperson even. For example, if you book 10k in flights to Hawaii and then file bankruptcy and hour later, creditor might be able to convince the court this is fraud. What if the activity is less overt? What if the Hawaii tickets were purchased 6 months before filing?
There are “presumptions” of fraud in the code as well. Section 523(a)(2)(C) lays out one of them. Consumer debt owed to a single creditor aggregating more than $675.00 for luxury goods and services within 90 days prior to filing bankruptcy are presumed to be non-dischargeable. If there is a presumption of non-dischargeability, debtor has the burden of proving it was not fraud.
It is also presumed non-dischargeable when debtor incurs a cash advance aggregating more than $950.00 within 70 days of filing bankruptcy. Again, when there is a presumption of non-dischargeability, the burden shifts to debtor to prove it was not fraud. Debtor does not want this burden. It is usually best to wait these presumptive periods so burden rests on creditors.
When the time is right, or when you are ready, reach out to Minnesota’s nicest bankruptcy law firm guaranteed or 100% off your fees at www.kainscott.com.