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What Is a Waiver of Discharge and Why Would Anyone Want One?

If a creditor claims that someone who is about to file New York bankruptcy has waived his or her right to discharge the debt, its claim will almost certainly be rejected. Anyone who signs a form promising to not discharge a debt is probably going to be protected by the law. It would defeat the entire point of the Bankruptcy Code, which is to allow people to deal with debts they cannot pay off.

However, it is possible for debtors to voluntarily waive their rights to a discharge. The Bankruptcy Code allows this in Section 727(a)(10). The waiver must meet a few requirements.

(1)  It must be in writing. This point makes sense given that the discharge is a right given the debtor in bankruptcy. Oral statements or even declarations in court will not pass muster.

(2)  The waiver must be executed by the debtor, meaning he or she must sign it. This way the court knows that the debtor understood the waiver.

(3)  The waiver must be signed after the debtor files bankruptcy.

(4)  Finally, the bankruptcy court must approve the waiver. Sometimes the court will hold a hearing with the debtor present to ensure that he or she understands the consequences of waiving a discharge. Even so, the court might still decline to approve the waiver if it believes it would harm the debtor or ultimately not be in the debtor’s best interests.

The second question in this post’s title, of course, screams for an answer: Why on earth would anyone want to waive their rights to a discharge?

It usually only occurs when a debtor realizes that the bankruptcy court won’t grant a discharge for some other reason, but the debtor still wants the liquidation (or even the repayment plan) to proceed instead of the court dismissing the case. Sometimes the trustee uncovers some kind of fraud or another act that might jeopardize the case, or worse, lead to an investigation by the U.S. Trustee or the Department of Justice. The bankruptcy trustee might strike a deal with the debtor to allow the case to proceed without referring the case to other government agencies.

For the most part though, waiving a discharge severely limits the debtor’s rights and benefits from bankruptcy. It should not be done without discussing the situation thoroughly with a New York bankruptcy lawyer.

For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced bankruptcy law changes Bruce Weiner for a free initial consultation.

Rosenberg, Musso & Weiner, L.L.P
26 Court St # 2211
Brooklyn, NY 11242, USA

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