Avoiding A Bankruptcy Discharge Revocation

Have You Had a Bankruptcy Discharge Revoked?

So you’ve got your bankruptcy discharge and you’re on your way to creating a successful life after bankruptcy; but wait …you receive notification that your bankruptcy discharge may be revoked.  What went wrong?  Revoking a bankruptcy discharge is not as common as you would think; but they happen. In most cases some type of fraud on the part of the debtor has occurred if the bankruptcy court has gone through the trouble to reopening a long closed bankruptcy case and revoking the discharge.

Reasons Why a Bankruptcy Discharge is Revoked

Below are the most common reasons why a bankruptcy discharge could be revoked:

  1. The bankruptcy debtor has hid assets which are not discovered until after the bankruptcy discharge has been granted.  For example, if a debtor “sold” a home to a friend or family member before bankruptcy and then had that property immediately sold back to them right after the bankruptcy, that might raise a red flag and prompt the bankruptcy court to reopen the case and revoke the bankruptcy discharge if they found wrongdoing.
  2. The bankruptcy court found a material misstatement after the bankruptcy discharge was granted and the debtor is unwilling or unable to offer a satisfactory explanation for why this incorrect information was given to the bankruptcy court.  For example, if the debtor said that they earned only $50,000 a year when it fact they earned $60,000 year that could be a reason for revoking a bankruptcy discharge if the debtor is unable to explain why they misstated the facts.
  3. The bankruptcy court discovers that the debtor used fraud, deception or manipulation to win the bankruptcy discharge.  For example, if the debtor had filed a previous Chapter 7 bankruptcy only a few years before filing second one and failed to disclose this fact, their bankruptcy discharge could be revoked.