A judgment debtor's worse nightmare: When a dischargeable judgment becomes non-dischargeable.
Seven years ago I was assigned a judgment against what appeared to be a defunct corporation. Upon investigation it was discovered that the debtor corporation was not properly incorporated. Pursuant to motion, I successfully amended the judgment to include the true name of the company as well as its owner.
Mr. Debtor was now on the hook personally. Unsurprisingly, he tried to vacate the default but failed. My judgment was nominal and could have been dispensed with easily. But the debtor decided to take a more convoluted course of action, evading payment, creating sham companies, filing false claims of exemptions, creating multiple identities and fraudulently transferring assets. When these strategies failed to discourage me, he then pulled out the ‘wild card’ by filing for Chapter 7.
The cause of action for my judgment was a straight breach of contract. Mr. Debtor could easily have discharged my debt had he played his cards right. But he made a fatal mistake. While in bankruptcy, he hid income, shifted assets and made material misrepresentations on his petition and in a 341 proceeding. After gathering evidence of these bankruptcy crimes, I filed an “Objection to Discharge” under §727, alleging material misdeeds which made the debtor ineligible for a discharge. I had done my homework and had more than enough evidence to bury my debtor.
The denial was granted by the bankruptcy court. My dischargeable debt was ordered non-dischargeable. But it doesn’t stop there. Because the debtor’s discharge was denied, all debts listed on the bankruptcy petition became automatically non-dischargeable too. Thus the debtor, who could easily have paid my claim, was now strapped with over a million dollars of additional debts which are forever non-dischargeable... and gaining interest every day.
Many debtors believe that bankruptcy is the end to their problems. In some cases, it is just the beginning.
©2007 Ramona Featherby