Filing for bankruptcy can be a lifeline for those overwhelmed by debt, but it’s not always guaranteed that your case will be approved. Understanding the common reasons for denial and how to avoid them is key to ensuring a successful bankruptcy filing.
Here are the main things that may result in bankruptcy denial. Knowing what these are is the first step to avoiding this outcome.
Fraudulent behavior or misrepresentation
Bankruptcy courts take fraud seriously. You may be denied bankruptcy if you attempt to hide assets, falsify information, or transfer property to friends or relatives before filing. Courts scrutinize these actions to prevent abuse of the system.
How to avoid it: Always provide complete and truthful information about your assets, income and financial history. Transparency is crucial.
Failure to complete mandatory courses
Before your bankruptcy can be processed, you must complete two court-approved courses: credit counseling and debtor education. Failure to complete these courses can result in the denial of your bankruptcy.
How to avoid it: Take the required courses within the necessary time frames and submit proof of completion to the court.
Not meeting eligibility requirements
Not all debts are dischargeable, and not all individuals are eligible for every type of bankruptcy. For example, if your income is too high, you may not qualify for Chapter 7 bankruptcy, which discharges most debts.
How to avoid it: Work with an attorney or financial professional to ensure you are filing under the appropriate chapter and that you meet all its requirements.
Failure to follow court orders
Ignoring or failing to comply with court orders, such as providing requested documentation, can lead to denial.
How to avoid it: Stay organized and respond to court requests promptly to ensure smooth processing of your case.