Filing for Chapter 7 bankruptcy can be critical for individuals or businesses seeking relief from overwhelming debt. However, not all filings are accepted.
Denials can result from various factors. Understanding these can help potential filers avoid common pitfalls.
Your income level is too high
Chapter 7 bankruptcy is generally intended for those who cannot pay their debts. The means test calculates whether the debtor’s income is below a certain threshold. If the income is too high, the filing might be denied.
You made improper expense calculations
Inaccuracies or omissions in calculating allowable expenses can lead to an incorrect means test result. Being thorough and honest in documenting expenses is crucial to pass this test.
You failed to complete credit counseling
Before filing for Chapter 7, a debtor must complete credit counseling from an approved agency. Failure to do this can result in immediate denial.
You tried to hide assets
If a court finds that a filer has intentionally hidden assets to qualify for Chapter 7, the case can be dismissed. Being honest is essential when filing for bankruptcy.
You haven’t waited long enough
You must meet certain time limits to file for bankruptcy. For Chapter 7, you must wait eight years. If this time has not passed, your filing will likely be denied. If a previous bankruptcy filing was dismissed due to the debtor’s failure to comply with court orders, this might lead to a denial for a certain period.
The denial of a Chapter 7 bankruptcy filing is a serious matter and usually results from mistakes or oversights in the filing process. By understanding the common reasons for denial, individuals and businesses can ensure that their filings are complete and accurate, increasing the chances of approval.