Can You be Denied a Chapter 13 Bankruptcy?

One of the questions new clients frequently ask us is whether they can be denied a Chapter 13 bankruptcy. There are two main ways that you can be denied a Chapter 13 bankruptcy in Philadelphia. First, you may not meet the eligibility requirements to file for Chapter 13 bankruptcy. If your secured and unsecured debt exceeds certain amounts, the bankruptcy court will not take your case. Second, you could be denied during the bankruptcy proceedings due to fraud or other issues that arise.

Are You Ineligible for a Chapter 13 Bankruptcy?

Many of our clients want to file for Chapter 13 bankruptcy because they will not have to sell their assets to pay for their debts, as they would in a Chapter 7 bankruptcy. In a Chapter 13 Bankruptcy, you can typically keep your home and vehicle. The court will determine how much you owe on all of your debts and devise a repayment plan. At the end of the repayment plan, which typically lasts three to five years, you will be able to keep your assets.

Not everybody is eligible for Chapter 13 bankruptcy, however. If your total amount of unsecured and secured debt exceeds the amount set forth in federal law, you will not qualify to file for Chapter 13 bankruptcy. As of this writing, an individual is eligible for Chapter 13 bankruptcy as long as his or her unsecured debts are less than $394,725  and his or her secured debts are less than $1,184,200. If your debts exceed this amount, you will need to file for Chapter 11 bankruptcy instead. 

Only individuals can file for Chapter 13 bankruptcy. There is one exception, however. If you are a sole proprietor, your business cannot file for Chapter 13 bankruptcy, but when you are a sole proprietor, your business and personal debts are both your responsibility, and you can include them when you file as an individual. Since you are personally liable for your business debts, you will be able to include them in the Chapter 13 bankruptcy process.

Attempting to Defraud the Bankruptcy Court

There are several reasons why a bankruptcy court will deny your Chapter 13 bankruptcy. Even if your application for bankruptcy has been granted and you start the process, the court can still dismiss your case anytime before finalizing your bankruptcy. A bankruptcy court will deny the discharge of your debt if you hinder, delay, or defraud a creditor.

Attempting to defraud a creditor can involve mutilating, destroying, transferring, removing, or concealing property within one year of filing for bankruptcy or after the date you filed for bankruptcy. Essentially, debtors cannot give away their assets before filing for bankruptcy in an attempt to conceal them from the bankruptcy court. 

If you are filing for bankruptcy, we recommend that you give full disclosure of your financial situation to your bankruptcy attorney about any changes and property or transfers you made before filing for bankruptcy. If you are not completely honest, the courts might deny your debt discharge.

Concealing or Destroying Information

Courts will deny the discharge of debt when the applicant destroys, falsifies, mutilates, or conceals information regarding his or her financial situation. This could include destroying financial documents or simply making false claims about your finances for your own benefit. For example, when someone makes assertions about his or her finances in the bankruptcy schedules but cannot prove them with evidence, the court may dismiss the bankruptcy case.

Lying

When applicants for Chapter 13 bankruptcy lie or make false statements, whether intentionally or unintentionally, the court may deny their bankruptcy filing. When you file for Chapter 13 bankruptcy, you are under penalty of perjury, and you agree that everything you submit in your application is accurate and true. If it comes to light that you made omissions in your application, a creditor or trustee can challenge your bankruptcy. It is essential to be completely truthful with the bankruptcy court and your attorney.

Asset Loss

Sometimes people who are filing for bankruptcy try to give away assets or hide them to keep them from being subject to the bankruptcy process. When a Chapter 13 bankruptcy applicant cannot explain a deficiency in assets or the loss of assets, the court may dismiss the case.

Refusal to Comply With a Court Order

Debtors must comply with all orders issued by the bankruptcy court. If a debtor refuses to obey a court’s lawful order, the court may deny the bankruptcy case. If you have questions about following an order from the bankruptcy court, we recommend speaking to your attorney. Simply not complying or ignoring the order will likely result in your case being dismissed.

Failure to Take the Instructional Course

 Part of successfully filing for bankruptcy in the United States involves taking a course about personal financial management. If you fail to take one of the approved instructional courses, the court will probably dismiss your case. The first course you need to take is a credit counseling course that you will need to fulfill before you can even begin processing your bankruptcy. The second course is a financial management course that you need to finish before your debts can be discharged. These courses cost anywhere from $20 to $100, depending on your location. Yet, completing them is much cheaper than having your bankruptcy case denied and needing to refile it.

Consult With a Chapter 13 Bankruptcy Lawyer Today

Are you interested in filing for Chapter 13 bankruptcy? Do you have questions about whether you could be denied a Chapter 13 bankruptcy in Philadelphia? If so, the experienced bankruptcy lawyers at the Law Offices of Cibik Law are here to help. Contact us today to schedule your initial consultation.