There are a wide variety of reasons that debtors choose to file for chapter 7 bankruptcy, from lost jobs to massive medical bills or credit card debt. While this financial solution does offer a fresh start to the majority of those who apply for the discharge of their debts, filing for bankruptcy does not guarantee success. There are a variety of reasons that a debtor’s bankruptcy filing could be rejected, a few of which are described below.
Failure to Pass a “Means” Test
Before being able to qualify for chapter 7 bankruptcy, debtors must pass a “means” test imposed by a court. This test is intended to help the court determine exactly how much disposable income debtors have. If a debtor is believed by the court to have sufficient disposable income to pay off their debts, their bankruptcy requests are usually rejected.
Failure to Provide Documents
In order to have debts discharged through bankruptcy, debtors are required to provide financial documents that support their cases. These documents include income tax returns. If there is any evidence that this tax information has been misrepresented or if the debtor fails to provide documentation, to begin with, the court may reject his or her case.
Challenges to Bankruptcy Requests
Chapter 7 requests can be challenged by creditors and bankruptcy trustees. Those challenging the filing must prove that the debtor is not eligible for discharge of his or her debt. The most common reasons for this to come up are false statements regarding debtors’ financial circumstances, the hiding of assets, and the failure to appear to mandatory credit counseling when applicable.
Failing to Take Instructional Courses
Most debtors applying for bankruptcy discharge must attend instructional courses regarding financial management. If they fail to attend at least two of these courses, which are comprised of credit counseling and financial management classes, it may be considered grounds for denying their bankruptcy petitions. It is not typically very expensive to attend these courses, so it’s absolutely not worth risking having to refile.
Refusal to Comply with Court Orders
Debtors who refuse to obey lawful court orders may have their cases denied despite being otherwise eligible for bankruptcy. The best way to prepare for a court hearing is to contact a bankruptcy attorney who can offer legal advice and representation.
Unexplained Loss of Assets
Debtors who cannot satisfactorily explain the loss of their assets are likely to face a denial in court. Under Chapter 7, most debtors are able to keep the majority of their property, so it just doesn’t make sense to attempt to cover up assets. Any omissions that have been made can be considered cause for challenging the petition, so it’s extremely important that debtors be truthful in describing their assets.