In standard bankruptcy cases, a debtor’s debts are discharged and some of their property is considered exempt from seizure and sale. However, creditors and bankruptcy trustees can object to these in objections to dischargeability and objections to exemptions. In this article, we define both of these terms. 

Key Takeaways

• An objection to dischargeability is when a creditor or bankruptcy trustee files to object to the discharge of a particular debt 
• Discharges can be objected to if the dischargeability issue involves fraud or false pretenses
• An objection to exemptions is when a creditor or bankruptcy trustee files to object to a debtor’s claim of a specific property as exempt from seizure and sale

What Is an Objection to Dischargeability?

Typically, a debtor who files for bankruptcy has all of their qualifying debts discharged, or erased. This can include things like credit card bills, medical bills, and personal loans. However, a creditor or the case’s bankruptcy trustee has the ability to object to the discharge of a particular debt, or even the entire bankruptcy case, by filing something called an objection to dischargeability. 

There are two ways that an objection to dischargeability may be filed.

• As an adversary proceeding - When the dischargeability issue involves a fraudulent act intended to deprive a creditor of payment
• As a motion - If the debtor previously received a discharge and isn’t entitled to another

Examples of nondischargeable debts include:

• Costs and damages caused by intentional and spiteful conduct
• All charges on a credit card over a certain amount made within 90 days of filing for bankruptcy
• Cash advances taken on credit cards of over a certain amount made within 70 days of filing the case
• Any damages or deaths caused while operating a vehicle while under the influence.

Examples of situations that may allow for objecting to an entire bankruptcy case include:

• Perjury by providing false information on the bankruptcy petition and schedules
• Transferring property to avoid including it in the bankruptcy
• Destroying property or documents
• Lying to the bankruptcy trustee or judge
• Failing to obey a lawful order of the bankruptcy court.

What Is an Objection to Exemptions?

When a debtor files for bankruptcy, it is standard for certain types of property to be exempt from being seized and sold off. This usually includes a variety of things that are thought of as being necessities of daily living such as home furnishings and clothing, with each state and the federal government having their own exemption lists. However, creditors and bankruptcy trustees can object to exemptions if they believe that the exemption is being used improperly.

This may happen for a few reasons, including:

• If the exemption law doesn't actually cover the property the debtor is trying to claim as exempt
• If the property is worth more than the debtor listed in the petition 

For example, one category that is usually considered exempt is tools of the trade that a debtor needs to perform their job. However, if a debtor tried to claim their car as a tool of the trade because they used it to commute to work, an objection to this exemption could be made.