If your Chapter 7 bankruptcy proceeds as expected, it will result in your unsecured debts being discharged by the court. However, there is a possibility that the court could decide to deny your discharge. If this happens, you could still be responsible for paying back those debts. If you are filing for Chapter 7, here is what you need to know about denied discharges.
Why Would the Discharge Be Denied?
There are numerous reasons that the court could use to deny your discharge, including fraud. It is your responsibility to be honest in your filings with the court. If the bankruptcy trustee discovers that information was withheld or fraudulently stated on your filing, it is possible that he or she could recommend that your discharge be denied. The court places significant weight in the recommendations of the trustee, so this could lead to a denial.
Another reason that your discharge could be denied is that a creditor successfully challenges your discharge. When you file for bankruptcy, all of your creditors will receive notice of your actions. After the notices are sent, the trustee will schedule a meeting that your creditors can attend. At the meeting, a creditor can challenge the discharge. After a judge hears both sides, the creditor could win.
Regardless of the reason for the denial, you will be notified at the time of the reasoning. To avoid reaching that point, there are ways you can lessen the chances of facing a discharge denial.
What Can You Do?
The most important step you can take to protect your discharge is to be honest on your documentation. Attempting to hide assets or failing to list any creditors on your documents could be a red flag to the bankruptcy trustee.
You also need to provide all requested information to the trustee within the time frame requested. The additional information can help the trustee get a clearer picture of your filing. Your cooperation could also help to counter the argument that you were being intentionally fraudulent.
If a creditor does challenge the dispute, you need to find out why and take steps to dispute the claims of the creditor. For instance, if the creditor's challenge is based on the amount owed, you need to provide documentation to the trustee showing the amount that you believed to be owed. A receipt, cancelled checks, or bank statements showing the payments to the creditor can help.
Involve a bankruptcy attorney, such as one from Hoffman, Hamer & Associates, PLLC, as early as possible to potentially avoid a discharge denial.