How likely is a creditor to file for an adversary proceeding ?
I filed CH7 and am in the 60 days period after the 341 meeting. I received a letter from the lender asking that I prove how I spend the consolidation loan. I have not responded at this point and am 18 days from the objection date. How likely is it that they will file an objection to this being discharged? Reading on the internet can be a bit scary. Fraud pops up a lot with the intent not to pay a debt, however, that was not the case. Is this something I should loose sleep over?
Thanks for your advise.
3 attorney answers
Based on what you described, I would be surprised if the creditor filed an A/P. But I'm surprised they went so far as to send you a letter asking you to clarify what you did with the consolidation loan, so maybe they will. It sounds like they may have a hard time proving that you had no intent to repay the money they loaned you at the time that you took out the loan, but if they do file an A/P you should retain an attorney.
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The answer to every legal question is almost always the same, and that answer is "it depends." Unfortunately, you told us the facts you wanted us to know and as volunteer attorneys, we have to wonder what you haven't told us. If you don't have legal representation in your Chapter 7, it may be nearly impossible to find representation if an adversary proceeding is filed against you. If you are represented, you should have asked your attorney before you filed chapter 7. Hope this perspective helps!
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Normally, an Adversary Complaint is rare. It depends a lot on the amount of debt. It does not make sense for a creditor to spend time and money to object to discharge of a debt less than $5,000. How the loan was used is immaterial unless the loan was for a specified purpose (i.e. the loan documents say how the proceeds are t be used). Also, you made payments and only stopped due to income loss. You also reached out to the lender before filing. The best strategy may be to do nothing. If you respond in writing you may say something that will hurt your case. If they are serious, they may contact you again. As always, refer the matter to your lawyer if you have one.
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