Can a creditor keep a debt out of your discharge by claiming fraud?

What counts as fraud under this rule?

The rule is about how a debt was obtained. It covers a debt for money, property, services or credit, including a renewal or refinancing, to the extent it was obtained in one of these ways:2

• False pretenses, a false representation or actual fraud.2
• A written statement about your financial condition that was materially false, that the creditor reasonably relied on, and that you made with intent to deceive. A loan application that misstates income is an example of a written statement about financial condition.2

The words to the extent matter. The exception reaches the part of the debt that was obtained by fraud, not automatically everything you owe that creditor.2

Is spending right before filing treated as fraud?

Some of it is presumed to be. The law presumes that two kinds of recent consumer borrowing are nondischargeable under the fraud rule. The dollar amounts change over time; the figures below apply to cases filed on or after April 1, 2025.2 4

Goods or services reasonably necessary for the support or maintenance of you or a dependent are not luxury goods or services. A presumption is a starting point for the court, and the creditor still has to bring the matter to the court. If you used credit shortly before filing, tell your lawyer exactly what you bought and when.2 4 1

How does a creditor raise a fraud claim?

Most exceptions to discharge apply automatically. Fraud does not. The debt is discharged unless the creditor asks the bankruptcy court to rule on it and the court decides the debt is excepted. The request is a lawsuit inside the bankruptcy case, called an adversary proceeding.1 2 3 5 6

1. The clerk gives creditors at least 30 days' notice of the deadline.3
2. The creditor files a complaint within 60 days after the first date set for the meeting of creditors.3
3. The court may extend the time for cause, but only on a motion filed before the time runs out.3
4. After notice and a hearing, the court decides whether the debt is excepted from the discharge.1 2

The creditor carries the load. If the question goes to trial, the party objecting has the burden of proving the facts essential to its claim.7 3 1 6

The law also discourages weak claims. If a creditor asks the court to except a consumer debt for fraud and loses, the court must award you the costs of the proceeding and a reasonable attorney's fee if it finds the creditor's position was not substantially justified, unless special circumstances would make that unjust.2

A complaint starts a lawsuit, and a lawsuit needs a response. If you are served with one, get legal help quickly.6

Can you be stuck with a debt from someone else's fraud?

Yes, in some situations. In Bartenwerfer v. Buckley (2023), the Supreme Court held that the fraud exception kept a Chapter 7 debtor from discharging a debt obtained by fraud when she was liable for fraud committed by her business partner, regardless of her own culpability.8

The Court also explained the limit. The bankruptcy rule takes the debt as it finds it: whether you are liable for another person's fraud in the first place is decided by other law, such as your state's law. If you co-owned a business or property with someone accused of fraud, that is a question for a lawyer.8

Does Chapter 13 change anything?

Not for this kind of fraud. Debts from fraud are on the list of debts that a completed Chapter 13 plan does not discharge, and the same deadline rule for the creditor's complaint applies in Chapter 13 cases.9 3

If a creditor does win, the plan can still pay the debt over time, but whatever is not paid in full under the plan is still owed when the case ends.10

How is this different from fraud in the bankruptcy case itself?

The rule above is about one debt and how you got it. A separate set of rules is about your conduct in the bankruptcy case. A court may deny a Chapter 7 debtor the whole discharge for things like committing perjury, hiding or destroying property, failing to keep or produce adequate financial records, or disobeying a court order.11

There are also neighboring exceptions for single debts: fraud or defalcation while acting in a fiduciary capacity, embezzlement and larceny. They work the same way as ordinary fraud, in that the creditor must ask the court for a ruling.2 1

Dishonesty in the paperwork itself can also be a crime. The official form instructions say a person who gives false information could be charged with a federal crime or lose the benefits of filing.12