Do Bankruptcy Courts Ever Deny Bankruptcies?

Every year, thousands of Americans file for bankruptcy to achieve a fresh start with their finances. If you have little income and significant debt, you could be eligible for a Chapter 7 bankruptcy. At the end of a Chapter 7 bankruptcy, the bankruptcy court will effectively eliminate most of your unsecured debts. Not everyone qualifies for a Chapter 7 bankruptcy, however. Those who do not qualify for a Chapter 7 bankruptcy can apply for a Chapter 13 bankruptcy. 

When we meet with clients, they often ask us if the bankruptcy court will deny their bankruptcy. It depends on whether the applicants meet the eligibility requirements for the particular type of bankruptcy they are filing. If you do meet the eligibility requirements, there are various other reasons why the bankruptcy court could deny your bankruptcy application, including the following:

Attempting to Defraud a Creditor

Engaging in any type of fraud can cause a denial of your bankruptcy application. If you defraud, hinder, or delay one of your creditors, the bankruptcy court will deny your application. Defrauding a creditor can include removing, destroying, or transferring property within a year before filing your bankruptcy application. If you engage in fraud at any time after you file your application, your application can be denied.

Bankruptcy courts want to prohibit applicants from giving away their assets to protect their assets from bankruptcy. Suppose someone is worried about giving up their sports car, so they give their sports car away to their adult child before they file for bankruptcy. This type of action could be considered defrauding a creditor. 

When you apply for bankruptcy, you must disclose all of your debts to your attorney immediately. You should also tell your attorney about any potential fraudulent behavior, so your attorney can prepare for questions about the matter from the trustee. It is possible that you can explain your loss of asset to the trustee, and the trustee may understand. It is also possible the trustee will deny your bankruptcy.

Making False Statements 

Similarly, if you can steal important information regarding your financial condition, the bankruptcy court could deny your Chapter 7 or Chapter 13 bankruptcy. Likewise, if you make false statements in connection with your bankruptcy, your bankruptcy may be denied. Remember that you are stating under oath that everything in your application is true when you submit your bankruptcy application. If the court finds out that you lied or left information out, one of your creditors can challenge your bankruptcy discharge.

Violating a Court Order

Violating a court order is a quick way to have your bankruptcy denied. The bankruptcy court may order you to submit more information about your bank accounts or assets. You must comply with these court orders, even if you do not think they are fair or necessary. Failure to comply with court orders will almost certainly result in the courts not discharging your debt through bankruptcy.

Failure to Disclose a Prior Bankruptcy Case

Sometimes applicants for bankruptcy assume that they will be denied if they tell the court that they have already had a bankruptcy in the past. As a result, they hide their previous bankruptcy and don’t disclose it to the court on their application. Failure to disclose your prior bankruptcy case well typically results in a denial of your application. It is essential that you are truthful and upfront about any other bankruptcy cases in your past.

Failure to Complete Your Required Financial Courses

Bankruptcy law requires that all applicants complete a credit counseling course. Applicants must complete this course before they file their application. They must also complete a debt management course before the court finalizes the discharge of their debt. After you pay for and finish each course, you will receive a certificate of completion. Your attorney can help you file the certificate with the court. If you do not take the class or fail to file your certificate on time, the bankruptcy court will dismiss your case.

Paying Your Court Filing Fees

In addition to completing the mandatory classes, you will need to pay all of your filing fees. If you have little to no income in your filing for a Chapter 7 bankruptcy, you can apply for a waiver of all of your court fees. The court will consider your expenses and your current income when deciding whether to grant or deny the waiver of fees. However, if you do not obtain a waiver and do not pay your fees, the court will dismiss your case.

Not Attending Required Meetings

Bankruptcy applicants must attend a mandatory hearing known as the meeting of creditors. During this hearing, the bankruptcy trustee in charge of your case will ask you questions while you are under oath. They will ask about your financial affairs and bankruptcy papers. You also need to present them with proof of your identity. Typically, the meeting of creditors only lasts for 15 to 30 minutes. Creditors rarely show up. Nonetheless, if you do not attend your meeting of creditors, the trustee will typically ask the court to dismiss your case.

Not Submitting Required Documents or Making Payments

When you file for bankruptcy, you must disclose all of your financial affairs to the court. You will need to fill out a set of bankruptcy forms, including schedules, bankruptcy petitions, and other required forms. You will also be required to submit supporting documents like your pay stubs, tax returns, and other documents that verify the information you have written down in your application. Failure to provide all the required documentation will result in a denial of your bankruptcy.