The chances of a chapter 7 bankruptcy application getting denied are minimal with more than 99% of all applications in the United States ending in discharge. Still, numerous bankruptcy applications are denied every year.
Understanding the reasons why your Chapter 7 bankruptcy may get denied is essential for ensuring a successful application process and avoiding potential setbacks.
Previous chapter 7 bankruptcy
A previous chapter 7 bankruptcy discharge could be a reason for denial if you have had one within a certain timeframe typically within the past eight years. The bankruptcy code imposes limitations on how often an individual can receive a Chapter 7 discharge aiming to prevent abuse of the bankruptcy system. If you’ve already benefited from a Chapter 7 discharge recently, you may not be eligible for another discharge so soon.
Failure to explain loss of assets
When filing for Chapter 7 bankruptcy, individuals must disclose all assets they own to the bankruptcy court. If it appears that the applicant has transferred assets out of their possession or sold them at significantly undervalued prices to avoid including them in the bankruptcy estate, the court may view this behavior as fraudulent or deceptive. Failure to provide a satisfactory explanation for the loss of assets can result in the denial of the bankruptcy application.
Bankruptcy fraud attempts
Engaging in fraudulent activities during the bankruptcy process, such as concealing assets, providing false information or attempting to deceive creditors or the bankruptcy court can lead to severe consequences. If the court determines that the applicant has committed bankruptcy fraud either by intentionally misrepresenting their financial situation or engaging in deceitful behavior, the application is likely to be denied
Seeking legal guidance can help to ensure that your Chapter 7 bankruptcy application is thorough, accurate and compliant with all legal requirements. That will increase the likelihood of a successful outcome and reduce the risk of denial.