Can a Bankruptcy Discharge Be Reversed?

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A court can reverse a bankruptcy discharge only if the bankruptcy filer is found to have improperly or incompletely reported debts. The Bankruptcy Code outlines the instances in which a court can reverse (the legal term is "revoke") a discharge. In all cases, the filer is entitled to a hearing with a lawyer before the court decides whether the allegations are true.

Fraud

A court can revoke a discharge if allegations of bankruptcy fraud are true. Wrongly reporting debts or assets willfully counts as bankruptcy fraud (for example, purposefully underreporting cash holdings), as does filing under false names and information, or filing in multiple states. Concealing assets through unlawful transfers or multiple filings also counts as fraud.

Acts of Impropriety

Section 727a6 of the Bankruptcy Code outlines three "acts of impropriety" that can result in a court revoking a discharge. A filer commits an act of impropriety when he refuses to obey a court order, answer a material question so as to avoid self-incrimination or answer a material question on any other grounds.

Misstatements

A court may revoke a discharge if the filer cannot clarify any misstatements, irregularities or other issues that arise from an audit. If an audit requests information or documents that the filer either withholds or cannot produce, a court may decide to revoke the discharge.

Rules

A trustee, creditor or the United States trustee can file allegations of improper bankruptcy procedures that can lead to revoking a discharge. Any allegations must be filed within one year of the discharge's issue date. However, the Internal Revenue can investigate fraud related to tax fraud at any time. As a result, any irregularities involving taxable assets may be investigated years after the case.

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