What Does a Motion to Expunge Mean During Bankruptcy?

Expungement means eliminating something completely -- acting as if it never happened. The concept is more closely identified with the criminal justice system, where judges sometimes have the authority to erase convictions for less-serious crimes when offenders have completed their rehabilitation and paid their proverbial debt to society. The idea is that expunging the conviction will make it easier for the ex-offender to get a job, rent an apartment, gain access to credit and do other things that can keep him out of trouble. In non-criminal matters, such as bankruptcy, expungement authority is less clear.

The federal court system handles bankruptcies, and nothing in the U.S. Bankruptcy Code specifically grants judges the authority to expunge bankruptcy cases. However, Section 105 of the code does give blanket authority to "issue any order, process, or judgment that is necessary or appropriate to carry out the provisions" of the code.

Section 107, meanwhile, allows judges to "protect a person with respect to scandalous or defamatory matter" that appears in court papers. Some bankruptcy judges -- but not all -- have interpreted those passages as providing the authority to expunge. Even when courts have recognized such authority, though, they appear willing to exercise it only in very narrow circumstances.

A review of bankruptcy court rulings on motions to expunge makes one thing clear: People who file for bankruptcy based on debts that they ran up themselves are highly unlikely to get their cases expunged, even if those cases are later dismissed. A bankruptcy filing is a request for the court's protection from creditors, and the simple act of filing results in a court order for those creditors to stop trying to collect the money they're owed. Asking for that protection is a conscious decision, judges have ruled, and people have to live with the consequences of that decision. However, some judges and even staff at the Justice Department office that oversees bankruptcy trustees have said expungement may be an option in identity theft cases. An example of such an instance would be a fraudster running up debts using someone else's identity, then filing a bankruptcy petition to either get temporary relief from creditors or, by carrying the fraud through to the end, actually wipe out the debt. Finally, in a noteworthy case in South Carolina in 2006, a federal judge ordered a couple's bankruptcy case expunged after their lawyer filed a bankruptcy petition without their consent.

Courts can take actions short of actually expunging a bankruptcy case. One is to leave the case in the court records but take the debtor's name off the docket; that way, the case won't pop up when someone searches the docket by the debtor's name -- but the case can still be found by someone who knows where to look for it. Another is to leave the bankruptcy in the record but include a statement in the case file saying the petition was filed fraudulently. Or a judge could declare a bankruptcy "null and void." That means the case remains on the record, but with a judge's notation that the bankruptcy should be disregarded. With these last two options, the court is leaving it up to whoever is looking at the case record to decide whether the existence of the bankruptcy case "means anything."