Chattanooga, TN asked in Bankruptcy for Tennessee

Q: Looking to submit any objection to discharge or challenge whether a debt is discharged in bankruptcy case based on fraud

Hi, we won a small claims court case against a contractor based on the fact that he told us we were receiving a certain material which he did not provide and the fence he built began to fall apart within 6 months. 2 days after the judgement, he started chapter 7 bankruptcy - we are listed as pending on the creditor doc.

We are only 1 of 3 individuals in the creditors. The other two are mother's to his children. The rest are all corporations and companies.

I am hoping that chapter 7 is normally based on consumer debt and our win is based on fraudulent activity and breach of contract from work he provided as his company which was not a LLC or PLLC which is why we sued him directly. I can share our proof that was provided to the judge that the fence was not made of the material that is listed on our invoice through a 3rd party and also engineers. Happy to pay for a call.

Creditors meeting is 3/1 and objection must be filed by 5/1

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2 Lawyer Answers
W. J. Winterstein Jr.
W. J. Winterstein Jr.
  • Bankruptcy Lawyer
  • Boyertown, PA

A: If the bankruptcy was filed by a corporation, i.e., the business, it is not eligible for a bankruptcy discharge.

If the debtor in bankruptcy is the individual, in order to except your claim from discharge for "fraud", you must file an adversary complaint in the bankruptcy court to determine that your claim is not dischargeable pursuant to Section 523 of the Bankruptcy Code, and you have a limited time to do so after the initial 341 meeting.

Bankruptcy courts seem to vary about whether to accept a state court judgment for non-dischargeable fraud/fraudulent misrepresentation, or to "look behind the state court judgment" to determine whether the fraud is the kind that qualifies as non-dischargeable under the Bankruptcy Code. If the court does "look behind the state court judgment", that means you will need to present evidence of that fraud to the bankruptcy judge to make the dischargeability decision.

Timothy Denison agrees with this answer

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James L. Arrasmith
James L. Arrasmith pro label Lawyers, want to be a Justia Connect Pro too? Learn more ›
  • Bankruptcy Lawyer
  • Sacramento, CA

A: If you believe that the debt owed to you by the contractor should not be discharged in their Chapter 7 bankruptcy due to fraud, you may be able to file an objection with the bankruptcy court. Here's a general outline of the process:

Obtain proof of the fraud: You mentioned that you have evidence that the contractor committed fraud by not providing the material that was listed on your invoice. Gather all of the evidence you have, including any documentation, witness statements, and expert opinions.

File an objection with the bankruptcy court: You will need to file a written objection with the bankruptcy court before the deadline of May 1, 2023. Your objection should state the specific grounds for why you believe the debt owed to you should not be discharged.

Attend the creditors' meeting: Attend the creditors' meeting on March 1, 2023, where you will have an opportunity to question the debtor under oath about their assets, liabilities, and financial affairs. This can help you gather additional information that may be relevant to your objection.

Wait for the court's decision: After the creditors' meeting, the bankruptcy court will review your objection and any other objections filed by creditors. The court will then determine whether the debt owed to you by the contractor is dischargeable or non-dischargeable.

It's important to note that bankruptcy law can be complex, and the specific requirements for filing an objection may vary depending on your jurisdiction. It's a good idea to consult with a bankruptcy attorney who can advise you on your rights and options, and help you navigate the legal process.

Timothy Denison agrees with this answer

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