Chapter 7 bankruptcy offers individuals overwhelmed by debt a way to eliminate what they owe and get a fresh start. However, approval is not guaranteed. Certain mistakes or eligibility issues can result in a denial or dismissal of the case.
While most Chapter 7 filings lead to a successful discharge of debt, the process involves strict requirements and legal steps. Even small errors can delay or prevent your case from moving forward. Understanding the possible obstacles can help you avoid common setbacks.
Factors that could lead to denial
Several key factors can cause a Chapter 7 bankruptcy case to be denied. These include both procedural missteps and issues related to eligibility:
- Improper filing: Mistakes in paperwork, failure to meet eligibility criteria or previously dismissed bankruptcy cases within the last 180 days can result in dismissal.
- Filing too soon: If you have received a Chapter 7 discharge in the past eight years or a Chapter 13 discharge in the past six years, you may not qualify to file again.
- Failing the means test: If your income is too high, or if your financial records show that you can repay your debts, you may not qualify for Chapter 7. This test compares your income and expenses to determine eligibility.
- Unpaid court fees: Bankruptcy involves fees that must be paid on time. Failing to pay or missing installment deadlines can stop your case from progressing.
- Dishonesty or fraud: Attempting to hide assets, making false statements or withholding financial information can lead to dismissal and possible legal penalties.
- Missing credit counseling: You must complete approved credit counseling before filing and a debtor education course before discharge. Failing to do so can result in denial.
Chapter 7 bankruptcy is meant for individuals who need relief from unmanageable debt, but it comes with responsibilities. Any failure to meet court requirements can lead to denial. Seeking legal guidance early in the process can help ensure your case is complete, accurate and filed properly.