Common Objections to Discharge Under 11 USC § 727: What You Need to Know

By Matthew Wegner, Bankruptcy Attorney

When filing for Chapter 7 bankruptcy, the ultimate goal is receiving a discharge—the legal elimination of your debts that gives you a fresh start. However, Section 727 of the Bankruptcy Code lists specific reasons why a discharge can be denied. After helping clients discharge millions of dollars in debt over more than 20 years of practice in North Fort Worth, I've seen these objections arise repeatedly. Understanding them can help protect your path to financial freedom.

What Is a Bankruptcy Discharge?

A bankruptcy discharge eliminates your legal obligation to pay most debts. After discharge, your credit report will typically show debts as "$0.00 balance discharged in Chapter 7." However, Section 727 of the Bankruptcy Code contains all the grounds for denying this crucial benefit.

Most Common Discharge Objections

1. Non-Individual Debtors (§ 727(a)(1))

The Issue: Only individuals can receive a discharge under Chapter 7—businesses cannot.

This means your LLC or corporation will not receive debt forgiveness through bankruptcy. For this reason, I generally recommend clients pursue personal bankruptcy rather than business bankruptcy. Since business entities can't get discharged, there's rarely a compelling reason to include them in the bankruptcy process. Your business debts will remain collectible even after a business bankruptcy filing.

2. Intent to Hinder, Delay, or Defraud (§ 727(a)(2))

The Issue: Transferring, concealing, or destroying property within one year before filing with intent to defraud creditors.

This is one of the most serious objections we encounter. To prove this violation, creditors must establish four elements:

1. Transfer or concealment of property
2. Property belonging to the debtor
3. Within one year of filing the petition
4. Intent to hinder, delay, or defraud creditors

Since proving intent is difficult, courts look for circumstantial evidence through "badges of fraud":

• Inadequate consideration for transfers
• Family relationships between parties involved in transfers
• Retention of possession after alleged transfer (e.g., "transferring" a boat to your nephew but keeping it at your house)
• Financial condition before and after the transaction
• Pattern of similar transactions (multiple suspicious transfers)
• Timeline of events and transactions

3. False Oath or False Documents (§ 727(a)(4))

The Issue: Knowingly and fraudulently making false statements under oath or in bankruptcy documents.

This objection arises when there are errors or discrepancies in your bankruptcy schedules. Remember, you sign all bankruptcy documents under penalty of perjury. To prove this violation, courts apply a five-prong test:

1. The debtor made a statement under oath
2. The statement was false
3. The debtor knew the statement was false
4. The debtor made the statement with fraudulent intent
5. The statement was materially related to the bankruptcy case

Important Note: In the Fifth Circuit, this can be proven through either actual intent to deceive OR reckless indifference to the truth. This means even failing to verify information (like not checking your bank balance before stating it) could potentially trigger this objection.

4. Failure to Obey Court Orders (§ 727(a)(6))

The Issue: Refusing to comply with lawful court orders or failing to provide requested documents.

If the court requests documents or information related to your bankruptcy, you must comply. While you can claim privilege against self-incrimination, doing so will result in discharge denial. The court has the right to examine all your financial records, and cooperation is mandatory.

5. Previous Discharge Timing Requirements (§ 727(a)(8) & (9))

The Issue: Filing too soon after a previous bankruptcy discharge.

The waiting periods are:

• 8 years between Chapter 7 discharges
• 6 years between Chapter 13 and Chapter 7 (with some exceptions for good faith plans paying 70-100% to creditors)

6. Financial Management Course Requirement (§ 727(a)(11))

The Issue: Failure to complete the required financial management course.

You must complete an approved financial management course before receiving your discharge. Cases are sometimes closed without discharge simply because debtors forgot this requirement.

Revocation of Discharge (§ 727(d))

Even after receiving a discharge, it can be revoked if:

• Fraud or asset concealment is discovered after the discharge
• The debtor refuses to turn over property to the bankruptcy estate (commonly seen with tax refunds)
• The debtor acquired property that should have been reported but failed to do so

The Bottom Line: Transparency Is Everything

The most important takeaway from all these potential objections is simple: tell the truth. Bankruptcy offers tremendous benefits—potentially eliminating tens or hundreds of thousands of dollars in debt—but you must be completely transparent throughout the process.

Best Practices:

• Disclose all assets and transactions completely and accurately
• If you don't know something, find out—hire a CPA for complex tax situations or business valuations
• Be honest about your financial condition even if it seems unfavorable
• Work closely with your attorney to ensure all paperwork is accurate
• Keep detailed records of all financial transactions

When You Need Professional Help

Given the complexity of these rules and the severe consequences of violations, bankruptcy is not a do-it-yourself endeavor. The stakes are too high, and the rules too intricate to navigate alone.

---

Matthew Wegner is a bankruptcy attorney with over 20 years of experience helping clients throughout the Dallas-Fort Worth area discharge millions of dollars in debt. His office is conveniently located in North Fort Worth, near Keller Central High School. We assist people throughout Fort Worth, Keller, Watauga, and Arlington with filing Chapter 7 bankruptcy. For a free consultation, call 817-494-3344 or email matthew@attorneywegner.com. Consultations are available in person or by video.