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

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.