If you file for bankruptcy, you might end up facing a complaint to determine dischargeability, or may even file one yourself. In a complaint to determine dischargeability, a creditor challenges the discharge of its debt (or you bring the complaint to ask the court to rule that a particular debt should be wiped out).
Bringing a complaint to determine dischargeability or defending against one can be complicated. Most debtors would do well to consult with an attorney. Below we have outlined the basic steps in a dischargeability action in bankruptcy, so you know what to expect.
To learn more about when non-dischargeability actions might be appropriate and how they are sometimes used by debts as well as creditors, see Non-Dischargeability Complaints in Bankruptcy.
The Start of a Dischargeability Action
A dischargeability action is a lawsuit, called an adversary proceeding, which is filed in the bankruptcy court. It begins much like lawsuits in other courts. The party seeking to have the court determine whether a debt will be discharged, the plaintiff (usually a creditor), files a complaint setting out the facts and circumstances that support the claim and requesting that a particular ruling be made by the court. A summons is issued to inform the defendant (usually the debtor) that the complaint has been filed and a deadline for filing a response has been set.
Both the summons and the complaint must be served on the defendant. Unlike most lawsuits outside of the bankruptcy court, service of a summons and complaint in bankruptcy is accomplished by mail. If the defendant is the debtor, service is usually sufficient if the summons and complaint are mailed to the debtor at the address listed in the debtor's bankruptcy filing.
Responding to the Complaint
If you intend to defend your right to have the debt discharged, you will need to respond to the dischargeability complaint.
Motion to dismiss or compel more definite statement. If the creditor has not properly set out its claim or the complaint is not clear enough to let you know what you are defending against, you can file a motion to dismiss or to compel a more definite statement of the claim. For example, dischargeability actions often involve claims that a certain debt was incurred through fraud. The complaint would need to provide you with enough information to identify the conduct that the creditor claims to be fraudulent.
Answer. If the claim is properly and clearly set out, you can answer the complaint. Your answer must respond to each numbered paragraph of the complaint, admitting or denying each statement, and if you have any defenses to the complaint or counterclaims against the creditor, you would assert them at this time as well. This is a serious stage as your right to use certain defenses or pursue counterclaims later in the case may be waived if not properly included in your response.
Failure to Respond. If you fail to respond to the complaint and don’t request additional time before the deadline runs, a default may be entered against you. It will not end the case right away but will allow the creditor to request that a judgment be entered. If you want to respond after a default is entered, you will first need to convince the court to set aside the default.
Witnesses, Documents and Disclosure Requirements
Under the federal bankruptcy rules, the parties must comply with certain disclosure requirements within a limited period of time. Both the plaintiff and the defendant must disclose to the other party:
- potential witnesses and records, such as relevant documents, emails and computer files
- names, addresses and telephone numbers for witnesses and experts, and
- copies or access to the documents and records.
The parties must also cooperate in setting a schedule for any other discovery that is necessary and preparing statements of facts that are not in dispute as well as a list of disputed matters.
Many courts have a standing order which identifies the procedures for disclosures and sets time deadlines.
Right to Additional Discovery
You are permitted to take discovery in adversary proceedings. Discovery is a method to obtain more information on the claims being made and gather evidence for trial. Discovery requests must relate to the claims being made directly or be reasonably expected to lead you to obtain information which could lead to evidence you can use. You can:
- serve written questions, called interrogatories
- request production of documents
- request to inspect property
- request that the other party admit certain facts
- request that the other party admit the genuineness of documents, and
- obtain testimony through depositions.
To learn more about discovery, see What to Do After You File a Lawsuit: Making a Discovery Plan and Formal Discovery: Gathering Evidence for Your Lawsuit
Most courts will hold a pre-trial conference after discovery deadlines have run to determine whether the case is ready for trial and consider motions for summary judgment or any other pre-trial motions. Procedures may vary but, generally, if the court determines that summary judgment is not appropriate and the case is ready for trial, a trial date will be set at the pre-trial conference.
Negotiating a Resolution
At any time throughout the process, you can attempt to negotiate a resolution with the other side. For example, you and the other party can agree:
- that the debt will be discharged
- that it will not be discharged, or
- to a compromise where only a portion of the debt will be discharged.
Negotiations can consist of informal discussions, or depending on court procedures, you may be able to use a mediator to assist in finding a resolution.
At trial, each party is allowed to present witness testimony and documentary evidence to support their positions and to challenge evidence and testimony presented by the other side. Because evidentiary rules apply, the court may not allow you to present certain evidence if you don't comply with the Federal Rules of Evidence. At the conclusion of the trial, based on the testimony and evidence presented, the court will determine whether the debt will be discharged or whether it will be declared nondischargeable.