4 Reasons a Las Vegas Creditor Can Dispute the Dischargeability of a Debt in Bankruptcy

Adversary proceedings are common in Las Vegas bankruptcy. In an adversary proceeding one party sues one or more other parties over an issue related to the bankruptcy in a hearing adjudicated by the bankruptcy court. Parties can include debtors, creditors, and the U.S. Trustee. One of the most common issues brought before the bankruptcy court in an adversary proceeding is a creditor disputing the dischargeability of credit card debt. According to section 523(2)(a) of the bankruptcy code a creditor can dispute the dischargeability of credit card debt if it was obtained via:

(1) False pretenses
(2) False representation
(3) Fraud
(4) Use of a materially false financial statement

The bankruptcy code is understandably hostile to those who are trying to discharge debts they obtained by lying to the creditor. Moreover the changes to the code in 2005 made it harder for debtors to prove that they aren’t trying to discharge credit card debt after buying luxury goods or taking cash advances from their credit cards. Thus:

  • If a debtor incurred $500 in credit card debt to one creditor within the 90 days preceding the bankruptcy filing and spent it on luxury goods, it is presumed nondischargeable.
  • If a debtor takes more than $750 in cash advances off his or her credit card within 70 days of filing, that too is presumed nondischargeable.

The operative word here is “presumed.” This means that taking a large cash advance from a credit card before bankruptcy won’t make the debt absolutely nondischargeable, but debtors in these circumstances will have to prove that it should be dischargeable. There aren’t many good examples, but there might be unusual situations like paying rent to a landlord who doesn’t trust a debtor’s credit.

In recent years, creditors have become more rigorous in reviewing bankruptcy petitions for attempts to discharge debts wrongfully obtained. This is a good reason to ensure that your case is handled by an experienced Las Vegas bankruptcy attorney.

For more questions about bankruptcy in Las Vegas, please feel free to contact an experienced Freedom Law Firm Las Vegas bankruptcy attorney for a free initial consultation. Call us at 702-745-8584 to set up your free consultation.

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