Reasons Bankruptcies Are Denied: Insights From the Law Offices of Wenarsky and Goldstein, LLC

Explore the common reasons bankruptcies are denied with the Law Offices of Wenarsky and Goldstein, LLC. Learn how to avoid these pitfalls and successfully navigate your bankruptcy filing.

Understanding Why Bankruptcies Are Denied

Bankruptcy is a court-supervised process that allows debtors to eliminate or repay their debts, allowing them to rebuild their finances on a clean slate. 

It can provide a fresh start for individuals and businesses overwhelmed by debt.  Unfortunately, not all bankruptcy petitions are successful. U.S. bankruptcy courts have the authority to deny bankruptcy petitions and withhold a bankruptcy discharge under certain circumstances that indicate a lack of merit or non-compliance with the Bankruptcy Code.

If you wish to begin the bankruptcy process, knowing the possible reasons for denial is crucial to preventing such an outcome.

The good news is that most of the issues that could lead to denial can be avoided with proper preparation and the type of experienced legal guidance that we offer at the Law Offices of Wenarsky and Goldstein, LLC. 

In this guide, we explain the major reasons why bankruptcy claims are denied to help you as you work towards getting out of debt.

Top 3 Reasons for Bankruptcy Denial

There are several reasons why a bankruptcy judge might refuse a bankruptcy petition. We’ve grouped these reasons into three major categories, which are highlighted below.

Incomplete Forms or Documentation

Filing a bankruptcy petition will require you to complete and file certain bankruptcy forms depending on the type of bankruptcy you choose and provide certain documents that show your

  • Assets
  • Debts 
  • Income 
  • Expenses.

These forms and documents are important because they will be used to determine the true state of your finances, your eligibility for bankruptcy, and the type of bankruptcy you qualify for. Therefore, all forms must be completed accurately, and the documents you provide must be valid and consistent with the information you provide.

For example, Chapter 7, bankruptcy, is typically meant for people who lack the resources to pay their debts even if they were granted more time to pay up. As a result, Chapter 7 petitioners must take and pass a means test to prove their financial incapacity.

The means test form is thus one of the documents that must be submitted for a Chapter 7 bankruptcy. Failing to complete and file this crucial form or making mistakes in the details you provide can affect your eligibility for this type of bankruptcy and can

  • Indicate a lack of transparency on your part
  • Lead to objections from creditors
  • Lead to suspicions of fraud.

In such circumstances, a bankruptcy denial is highly likely.  If you wish to avoid such an outcome, you must ensure that all your bankruptcy documents are in order before you file. 

Fraud or Misrepresentation

Transparency is a crucial element of the U.S. bankruptcy system. So, When you are filing bankruptcy, you need to come clean about  your true financial state, which means you must

  • Avoid hiding assets
  • Avoid understating income 
  • Be truthful in all declarations

If you purposely or dishonestly withhold information, falsify records, or destroy evidence, the bankruptcy court can deny you a debt discharge, which defeats the purpose of filing for bankruptcy in the first place. You could also be found guilty of bankruptcy fraud and perjury, which attract serious criminal penalties.

However, sometimes misrepresentations during bankruptcy might be accidental. Many bankruptcy filers do not fully appreciate the complexities of the bankruptcy system, which could cause them to make mistakes that could be interpreted as fraudulent at first glance. That’s why it is important to work with a professional who is familiar with the system so they can help avoid such issues.

Some people resort to fraudulent acts such as hiding assets because they fear losing the assets they have worked for. The beauty of the bankruptcy system is that there are options (like Chapter 13 bankruptcy) that can help preserve your assets while giving you a chance to catch up with your outstanding debts. So, if you have concerns about the security of your assets, it would be wise to discuss them with a bankruptcy lawyer so they can help you explore all possible options.

Failure to Meet the Statutory Requirements

Bankruptcy filers must meet certain primary requirements. Some of those statutory pre-conditions include:

Attending the 341 Meeting (Meeting of Creditors): The 341 meeting is compulsory in all bankruptcy proceedings. Creditors are not required to attend this meeting, but attendance is compulsory for debtors. 

If a debtor fails to attend the meeting, the bankruptcy trustee can ask the court to dismiss the case or may seek any other legal relief against the debtor because they failed to cooperate.

The 180-Day Wait After a Previous Bankruptcy Dismissal: Debtors who filed previous bankruptcy petitions that were dismissed due to certain conditions must wait at least 180 days before filing a new bankruptcy petition; otherwise, the new petition will be denied.

Some of the conditions referred to here include the debtor’s 

  • Wilful failure to appear before the court
  • Non-compliance with court orders
  • Voluntary dismissal of the previous petition.

Credit Counseling and Debtor Education: Every debtor seeking bankruptcy must complete a credit counseling course within 180 days before filing the petition. 

After filing, they must also take debtor education courses and provide certificates of completion for both courses before their debts can be discharged. 

Preventing Bankruptcy Denial: How Our Experienced Bankruptcy Attorney Can Help

At the Law Offices of Wenarsky and Goldstein, LLC, we stand as your allies in this complex journey, driven by our commitment to assisting you as you seek debt relief and a fresh start.

With our knowledge and experience, we can help minimize your chances of bankruptcy denial through 

    • Thorough Preparation: We can meticulously review your bankruptcy documents,  ensuring they are complete and accurate.
    • Eligibility Assessment: We can provide a comprehensive case evaluation to determine if you meet the intricate qualifications for filing for bankruptcy and the specific type of bankruptcy you may qualify for before you begin the process. This way, you don’t waste valuable time and resources on a procedure that you’re ineligible for.
    • Statutory Compliance: We are prepared to guide you through the myriad of bankruptcy rules to ensure you meet all the pre-and post-filing conditions, thereby reducing the risk of a denial.
    • Bankruptcy Court Representation: Our experienced bankruptcy attorney can represent and advocate for you during bankruptcy court proceedings and ensure that your interests are protected throughout.

    Our goal is to help you achieve the maximum bankruptcy discharge possible, substantially reducing or eliminating your debt load and clearing the way for you to ride from your financial distress. We’d be glad to guide you through these difficult moments and light your way as you work toward future financial stability.

    Contact Us for Help With Your Bankruptcy Case

    Every year, many debtors find their bankruptcy cases denied due to simple mistakes that could have been prevented. You don’t have to be one of them.

    With proper legal guidance, your bankruptcy petition can sail through with minimal hitches since there’ll be little or no room for you to fall prey to those common mistakes that usually lead to bankruptcy denials.

    Our dedicated team at the Law Offices of Wenarsky and Goldstein, LLC can help you navigate the personal or business bankruptcy process and the thicket of legal requirements that make it so complicated.

    Contact us today to schedule a consultation.  Let us help facilitate your journey towards financial stability.

    Call the Law Office of Wenarsky & Goldstein

    At the Law Offices of Wenarsky & Goldstein, LLC, our New York and New Jersey attorneys are experienced and knowledgeable in bankruptcy, estate planning and probate, guardianship, special needs planning, and real estate law. To learn more about how we can assist you with your legal needs, call us today at 973-453-2838.