If you’re considering filing for bankruptcy, you’re likely looking for relief from overwhelming debt. That relief comes when the bankruptcy court enters an order of discharge after you complete all the requirements for the type of bankruptcy you file. Even though you might qualify for a discharge, not all debts go away. A dischargeability action occurs when your creditor files a lawsuit within the bankruptcy case asking the judge to deny the discharge of a debt that would usually get wiped out.
Some debts are automatically entitled to a bankruptcy discharge. Other debts will remain your responsibility until they’re paid off (nondischargeable debt). Debts that the court will discharge automatically include:
Nondischargeable debts that don’t go away include:
With still other debts, dischargeability isn’t clear cut. Some will get discharged unless the creditor files an adversary proceeding called a dischargeability action (a lawsuit filed in bankruptcy court). Debts that will get discharged unless a creditor successfully launches a challenge include those:
The case starts when the creditor file and serves a complaint. After the debtor responds, the case will then move into the discovery phase. Each side can take depositions, ask interrogatories, and use other techniques to find out about the opposing side’s position.
Once complete, the parties can settle the matter, or go to trial before the judge. In the latter situation, the court will hear evidence and resolve the issue by making the final dischargeability determination.
A creditor or debtor can file a dischargeability action on any debt because sometimes it’s necessary to ask the court to confirm the status of a particular debt. For instance, recent income tax debts aren’t dischargeable, but the rules that pertain to the discharge of a tax debt are convoluted. The debtor might want to file an action to ask the court to determine whether it will go away in the bankruptcy case.
Another example is alimony. Sometimes family law attorneys don’t accurately (or correctly) label the money that one ex-spouse must pay another—and it matters in bankruptcy. A property settlement is usually dischargeable, while alimony is not. If these amounts aren’t described correctly in the family court paperwork or marital settlement agreement, or the parties don’t agree about the characterization, either the creditor or the debtor can ask the bankruptcy court to determine the dischargeability status of the obligation.
For many debts, either a creditor or the debtor can bring a dischargeability action at any time, even after the closure of the bankruptcy case. The parties are also not limited to bringing dischargeability actions in the bankruptcy court. For instance, the debtor might decide to raise the issue of dischargeability of alimony in a case that’s pending in state family court.
For some debts, however, the creditor must bring the dischargeability action in the bankruptcy court or the federal district court no later than 60 days after the first date set for the meeting of creditors. The creditor can ask for an extension of the deadline, but if the deadline passes without the extension, the creditor loses the right to bring an action in cases involving the following:
The creditor must file any of the above dischargeability actions within the 60-day period (unless the creditor obtains an extension).