If an individual is facing financial difficulties and gets to the point where her or she feels like no other option is viable other than filing for bankruptcy, the last thing he or she wants to even consider is the possibility that bankruptcy could be denied.
However, circumstances do exist where a bankruptcy petition may be denied. Below are some of the most common reasons.
1. Inadequate Documents Submitted
The debtor is asked to present certain documentation to the court when a bankruptcy petition is filed. The bankruptcy trustee needs to see a complete picture of the debtor’s financial situation before deciding how to go forward.
This documentation can include paycheck stubs, statements from banks or other financial situations, mortgage documentation, car loan documentation or lease documents, tax returns from previous years.
It is important that all of this documentation, including anything that may be requested on top of the basic information. If the debtor fails to require the correct documentation, provides incorrect or insufficient information, the bankruptcy petition may be denied.
2. Filing Too Soon
Timing is everything when it comes to bankruptcy, as well. If the debtor has filed bankruptcy previously and files again, if it is done too quickly under statutory guidelines it is possible that the petition could be denied.
If the debtor filed Chapter 7, he or she has to wait at least eight years from the date that discharge was received before Chapter 7 bankruptcy can be filed again.
If he or she wants to file Chapter 13 bankruptcy after receiving Chapter 7 bankruptcy, at least four years has to pass before Chapter 13 can be filed.
Under Chapter 13 bankruptcy, if the debts were discharged in a previous Chapter 13 case, the debtor cannot receive a subsequent discharge in a later Chapter 13 unless it is filed at least two years from the date the first case was filed.
If the debtor received a discharge in a previous Chapter 13 proceeding, he or she must wait at least six years from the date the Chapter 13 was filed before he or she can file for and receive a discharge in a later Chapter 7 bankruptcy case.
3. Fraud Or Concealing Information
A bankruptcy petition can be denied if the debtor is using the bankruptcy proceed to perpetuate some form of fraud. Many times, debtors do use these proceedings to try to avoid a debt unfairly.
When the bankruptcy petition is filed, the trustee also asks the debtor to testify regarding his or her case and financial situation. The trustee will ask for specific information, and it is extremely important that this information must be complete and 100 percent accurate.
If the trustee later finds out that the trustee failed to disclose important information or intentionally withheld, the petition can be denied. Also, the petition could be denied if the debtor tries to hide money in other accounts or fails to list a creditor who ends up having a valid claim.
If the debtor ended up not providing this information unintentionally, this error can be explained or a petition could be filed later with the inadvertently left-out information included.
4. Not Taking the Required Instructional Course
The United States Bankruptcy Code requires that two instructional courses must be taken before bankruptcy can be finalized. These classes focus on personal financial management and aim to avoid the debtor having to file for bankruptcy in the future.
The first course is a credit counseling class that must be taken before the debtor can start the bankruptcy proceedings. The second class is a financial management course that must be taken and completed during the bankruptcy case. It must be completed before a discharge will be issued.
The fees to take these courses can range between $20 to $100, and while, yes, the bankruptcy debtor may find these fees hard to pay given his or her financial situation, the cost of having to go through the entire bankruptcy proceedings again can be even more cost-prohibitive.
These classes may seem minor in the grand scheme of things, but not receiving a bankruptcy discharge because the debtor failed to take a simple course is not worth it in the end.
Contact Collins & Arnove Today
Facing a bankruptcy can be an intimidating process. We are here to walk you through it every step of the way. If you need assistance, Collins & Arnove can help you. To learn more, call 972-435-9738 for your free consultation today.