The importance of crossing Ts.

For many years it has been commonly accepted that if you file for bankruptcy and get a discharge your creditors have to leave you alone or else.  The “or else” was explained by saying that if your creditor sought to enforce the debt after discharge then they would be punished by the Bankruptcy Court.  A recent decision by the SCOTUS has weakened this assumption.

The United States Supreme Court has recently held that the standard of proof necessary in a contempt case for violation of the discharge provisions of the Bankruptcy Code is higher than most attorneys have thought.  In a case of first impression, the Court held that debtors must prove that a creditor had no reasonable basis on which to think that it was okay to collect the debt.

Of course, most state laws also make a debt discharged in bankruptcy a nullity.  In other words, a debtor cant be sued in state courts to collect a debt that has been discharged, the debt simply no longer exists.  This development coupled with a recent Fifth Circuit ruling that a debtor can only seek contempt against a creditor in the Court that heard the original bankruptcy case makes the whole issue of preventing creditor post discharge abuse a lot more complicated.

The cure for both problems is good record keeping, notice to everyone involved of the discharge, and good records retention.  Every debtor should get a copy of their entire bankruptcy court case file before they breathe a sigh of relief.

This article is written by an attorney at Attorney Donald Wyatt PC. Always consult an attorney before making any legal decisions. To make an appointment today, please click here to contact us.

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