There is no guarantee that your Chapter 7 bankruptcy will end with a discharge. However, with proper preparation and a deep understanding of the pitfalls, you can minimize your risk and increase your chances of a successful Chapter 7 case.
The goal of filing a Chapter 7 bankruptcy is to get a discharge. This court order releases you, the debtor, from personal liability for certain types of debts. It’s like wiping the financial slate clean.
Here’s what you need to know to avoid the judge denying your Chapter 7 discharge.
Unpacking Denial of Discharge
Denial of discharge is a serious matter, usually occurring when there’s fraudulent activity, such as hiding assets or lying about your financial situation. When the bankruptcy court denies your discharge in a Chapter 7 case, you remain responsible for paying back all your debts.
Denial of your Chapter 7 discharge doesn’t end the case, though. The Chapter 7 trustee will still gather and liquidate any non-exempt assets; all you lose is your fresh start free of those debts. Even if you file a Chapter 7 bankruptcy in the future, those debts won’t be wiped out.
Conditions for Denial of Discharge
According to 11 USC Section 727, the bankruptcy court can deny a Chapter 7 discharge under several circumstances, including if:
- You’re not an individual (only people can receive a Chapter 7 discharge, not businesses).
- You received a Chapter 7 discharge within the last eight years.
- You’ve hidden, destroyed, or failed to keep adequate records of your assets and financial affairs.
- You lied or tried to defraud the court or your creditors.
- You failed to explain any loss of assets.
- You refused to obey a lawful order of the court.
- You don’t complete an approved financial management course.
Who Can Request a Denial of Discharge?
The U.S. Trustee, the Chapter 7 trustee, or any of your creditors can request a denial of discharge. They would do so by filing a lawsuit, called an “adversary proceeding,” in your bankruptcy case.
As with any lawsuit, you can respond to the allegations and take the case to trial. The person or entity seeking the denial of discharge must prove the case; failing to do so will result in the court issuing the discharge as normal.
Pro Tips for a Smooth Chapter 7 Bankruptcy
If you’re considering filing for bankruptcy or if you’re already in the process, keep these points in mind:
- Honesty is your best policy. Always be truthful about your financial situation.
- Keep meticulous records of your assets, liabilities, and financial transactions.
- Follow all court orders and procedures.
- Work with an experienced bankruptcy attorney to avoid problems.
Remember: Chapter 7 bankruptcy can help you regain control of your financial situation. Navigate the process honestly and diligently to get the fresh start you deserve.
ABOUT THE AUTHOR
Since I became a lawyer in 1995, I’ve represented people with problems involving student loans, consumer debts, mortgage foreclosures, collection abuse, and credit reports. Instead of gatekeeping my knowledge, I make as much of it available at no cost as possible on this site and my other social channels. I wrote every word on this site.
I’ve helped thousands of federal and private student loan borrowers lower their payments, negotiate settlements, get out of default and qualify for loan forgiveness programs. My practice includes defending student loan lawsuits filed by companies such as Navient and National Collegiate Student Loan Trust. In addition, I’ve represented thousands of individuals and families in Chapter 7 and Chapter 13 bankruptcy cases. I currently focus my law practice solely on student loan issues.
I played a central role in developing the Student Loan Law Workshop, where I helped to train over 350 lawyers on how to help people with student loan problems. I’ve spoken at events held by the National Association of Consumer Bankruptcy Attorneys, National Association of Consumer Advocates, and bar associations around the country. National news outlets regularly look to me for my insights on student loans and consumer debt issues.
I’m licensed to practice law in New York and California and advise federal student loan borrowers nationwide.