Who can make trouble for you in a Chapter 7 bankruptcy case?

If you file a Chapter 7 bankruptcy case, are your creditors likely to object to it?

Typically, the answer is no, although every bankruptcy attorney has war stories about the exceptions. And despite what you’d probably guess, objections are less likely to come from major credit card companies than they are from creditors whom you know personally.

Like your former divorce attorney, for example.

In the Riley case, a Massachusetts teacher listed the lawyer who worked on her divorce case as a creditor in her Chapter 7 bankruptcy (which is the proper thing to do, by the way). The lawyer, however, raised holy hell, and forced the poor debtor to go through a trial in order to get her discharge.

The attorney questioned nearly every aspect of her former client’s finances in an attempt to get her bankruptcy case dismissed. Her salary, anticipated raises, and apparent omissions from her schedules were all brought up at the trial. One of those omissions was the child support she received through the divorce case. Lesson of the day: child support you receive must be declared in at least three places on a bankruptcy filing — on the means test form, on Schedule I, and on the statement of financial affairs.

Nevertheless, US bankruptcy judge Joan Feeney in Boston sided with the debtor at this trial, ruling that the debtor’s amendments to her original filings were enough to display that the case was really not an abuse of the Chapter 7 system.

But, for those reading this: do remember to tell your bankruptcy lawyer about any child support payments that you are entitled to receive!

 

By Doug Beaton

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