10 Common Bankruptcy Questions

Can My Creditors Fight My Bankruptcy?
This painting by Pieter Breughel the Younger shows peasants paying the tax collector out of their meager goods. © Christie's Images/Corbis

As we mentioned earlier, bankruptcy is bad news for creditors. In both Chapter 7 and Chapter 13 bankruptcies, the creditor is almost guaranteed to receive much less than the total debt; sometimes they don't even get one red cent. It's in the creditor's interest, therefore, to look for holes in a debtor's bankruptcy case.

After filing a petition for Chapter 7 or Chapter 13 bankruptcy, the debtor is required to attend a meeting of creditors overseen by the court-appointed trustee. All creditors are invited to the meeting to ask the debtor questions about his or her finances. If a creditor believes that the debtor lied on credit applications or is attempting to hide assets from the court, he can file an objection called an adversary proceeding within 60 days of the meeting of creditors [source: Michon].

An adversary proceeding is rare, but it's essentially a separate lawsuit filed with the bankruptcy court on behalf of one of your creditors (or even the trustee). Adversary proceedings, unlike regular bankruptcy cases, are handled by a judge. If the judge finds that the debtor intentionally committed fraud to avoid paying back a debt, the debtor could be tried in a separate criminal case. Bankruptcy fraud is a federal offense that can carry serious jail time.