Avoid 4 Common Reasons For Chapter 7 Bankruptcy Denial
Most borrowers who file for Chapter 7, or liquidation, bankruptcy see their case to its completion successfully. However, a few find themselves denied for a variety of reasons. What are these? How can you avoid any problems that may lead to denial? And where can you get help navigating a successful case? Here's what you need to know about the four most common reasons for denial.
1. A Recent Bankruptcy
Many people only need to go through bankruptcy once in their life. However, you can actually claim this protection multiple times. Be cautious about your timing, though, if you need to declare bankruptcy after a prior case.
In general, you cannot receive a new discharge of debt if you had a prior discharge through Chapter 7 within the last eight years (six years for Chapter 13). Check with an attorney if there might be an overlap in timing. You may need to either choose Chapter 13 or wait longer.
2. Bankruptcy Fraud
Courts take a dim view of accidental or intentional bankruptcy fraud. This may include things like trying to hide assets from the trustee or creditors, preferential payments to certain lenders, or misrepresenting your finances on forms.
Bankruptcy law can be complicated, so you may find that you didn't understand the rules or how to properly complete the steps of bankruptcy. An attorney may be able to argue your case with the trustee and avoid denial.
3. Failure to Complete Steps
The most common step that debtors fail to do is complete the credit counseling course. This must be done before you can file for Chapter 7 bankruptcy. It's not a difficult requirement, but it is designed to see if you can stave off bankruptcy and fix financial issues on your own. For a list of approved credit counseling courses and other steps to take before (and after) filing, consult a lawyer in your state.
4. Income Too High
Finally, one of the most frequent causes of Chapter 7 failure is that you simply don't qualify because your income is too high. The bankruptcy court expects you to fulfill more of your obligation to creditors than simple one-time liquidation offers.
The good news is that you can still file for bankruptcy. You may have to choose Chapter 13, however, and use a repayment plan. This takes longer and is more complicated, but it provides many benefits — including keeping more assets, automatic stay of collection, and lengthened time to pay debts.
Where to Start
The best way to avoid causing delays or denial of your case is to start by working with an experienced bankruptcy lawyer in your state. No matter what route you take, they'll help you ensure success and a fresh financial start.