While chapter 7 bankruptcy cases usually go fairly smoothly, it is not uncommon for creditors to threaten to file an objection to the discharge of a debt owed to them. In many cases, these creditors are large credit card companies arguing that the debts owed to them should be not discharged in a debtor’s chapter 7 petition because certain of the charges made by a debtor prior to the filing of the bankruptcy case were improper and thus non-dischargeable. They will often threaten to file an objection to discharge unless the debtor settles that objection with them for some amount of money.
In my experience, the majority of these claims are without merit.
The only credit card charges made just prior to the filing of a bankruptcy that are deemed to be non-dischargeable are cash advances and charges for luxury purchases. Of course, charges for basic living necessities are not included in either of those categories.
If we receive these types of letters from creditors, we will typically go over the charges made by our clients and decide whether the creditor’s threat is valid. In the usual case where the claim has no merit, we will then send a letter out to the creditor explaining why their claim is frivolous, citing applicable Bankruptcy Code provisions. Upon receipt of the letter, the creditor will often back down and is not heard from again.
These creditors are often just trying to secure a settlement and judgment against individuals who are not prepared to defend themselves. They often believe that the threat of objection to discharge will scare individuals into handing over a sum of money. However, with the right representation and analysis of the relevant law, usually with the aid of an attorney, debtors can find that these threats are often without merit.