3 reasons your Chapter 7 bankruptcy can be denied

On Behalf of | Oct 13, 2024 | Chapter 7

A Chapter 7 bankruptcy discharge can provide much-needed relief by allowing individuals to eliminate most of their unsecured debts and enable them to regain financial stability. However, not all not all Chapter 7 bankruptcy filings are successful.

When you apply for a Chapter 7 bankruptcy discharge, the bankruptcy courts will review your financial situation and may deny your application based on specific criteria. Here are three reasons for Chapter 7 bankruptcy denial.

1. Dishonesty and fraud

When filing for Chapter 7 bankruptcy, honesty is crucial. If the bankruptcy court detects any dishonesty or fraudulent activity, such as failing to disclose assets, providing false information or attempting to hide income, your application can be denied. Courts have strict measures to identify fraud, and even the slightest indication of wrongdoing can lead to severe consequences, including the possibility of criminal charges in extreme cases.

2. Applying for Chapter 7 discharge too soon

There are strict timelines for filing a Chapter 7 bankruptcy discharge. If you applied for Chapter 7 in the past eight years, you cannot file again for Chapter 7. If you had previously sought Chapter 13, you can typically file for Chapter 7 after six years, as long as you completed the repayment plan. Additionally, if your previous case was dismissed for noncompliance, you may face restrictions on re-filing.

3. Means test failure

If you do not meet the requirements of the means test, your Chapter 7 bankruptcy can be denied. The means test examines your income and expenses to determine if you can manage to settle your debts. If your income is more than the median income for Indiana or if you have enough disposable income to settle a portion of your debt obligations, you may be denied Chapter 7. Failing the means test often requires you to pursue Chapter 13 bankruptcy instead, which involves a repayment plan over several years.

If your bankruptcy application was denied, you may consider seeking legal support to better understand your options moving forward.