I was sued in my bankruptcy for nondischargeability. What will happen if I don't respond? Are the consequences harsh?
If you have been served with an adversary proceeding in your bankruptcy for nondischargeability of a debt, you should respond as soon as you can.
(Learn more about adversary proceedings in bankruptcy.)
The bankruptcy discharge is typically the purpose behind your bankruptcy, particularly in Chapter 7. When you receive your bankruptcy discharge, the court is discharging your liability on dischargeable debts. That means that although the debt still exists (so cosigners and joint accountholders are still responsible), you are no longer legally obligated to repay it, and your creditors cannot try to collect it from you.
Dischargeable debts include credit card debt, personal loans, some utilities, medical bills, money judgments (as long as there is no judgment lien), and certain income taxes, amongst others. (Learn more about the Chapter 7 bankruptcy discharge.) However, dischargeable debts can be made nondischargeable if the creditor to whom you owe money files a nondischargeability action against you in the bankruptcy court and wins.
Debts that are generally dischargeable can become nondischargeable. Bankruptcy law provides that debt incurred by use of fraud is nondischargeable; however, the creditor has to ask for the debt to be nondischargeable by filing a lawsuit within the bankruptcy case. Debts that are normally dischargeable may be deemed nondischargeable if the creditor can show that you incurred the debt fraudulently. For example, if you run up your credit card with the intent to file bankruptcy and get rid of the debt, the credit card company may accuse you of fraud and file a nondischargeability action to make the credit card debt nondischargeable.
If you receive a nondischargeability lawsuit, you will have a deadline to respond. If you do not respond within the deadline (usually 21 to 30 days, depending on the local rules of your bankruptcy court), the court will enter a default. The creditor who filed the lawsuit can then obtain a default judgment against you. The judgment will state that the debt is nondischargeable, and after your bankruptcy is over, you will have to repay the debt even though you obtained a discharge. Therefore, if you receive a nondischargeability lawsuit, responding as soon as you can is within your best interest.
by: Rebecca K. McDowell, Contributing Author