Imagine finally working up the courage to take control of your financial situation and file for bankruptcy, only to learn it will do you no good. After endless calls from creditors and feelings of desperation in relation to your finances, you fill out the paperwork and take the necessary steps to get things under control. Unfortunately, if not handled properly, your efforts could fail and your bankruptcy be denied. This is known as a denial of discharge.
Receiving a denial of discharge is the worst case scenario when it comes to bankruptcy. Essentially, it means you have been turned down by the judge for your bankruptcy.
There are things you can do to reduce your risk for this happening, but it requires careful effort on your part. You also need to understand how the bankruptcy process works and what your responsibilities are in the process, which is why it is so important to work with a bankruptcy attorney.
What can you do to reduce your risk for a denial of discharge?
A denial of discharge begins with a creditor or trustee filing a request to the court that debt not be discharged. The most common reason a denial of discharge is requested and granted is because the debtor is believed to have been dishonest on his or her bankruptcy petition or he or she failed to keep accurate financial records.
Once filed, you will be served with the complaint to deny the discharge. Once served, you have 30 days to file a response with the court. Your response can be an answer to the complaint or a motion to dismiss. The answer attempts to reply to the complaint with factual statements admitting or denying the information included within. The motion requests the court to dismiss the complaint because it does not stand up to legal scrutiny. Your attorney will be able to help you determine how best to respond.
Failing to respond to the complaint causes your case to be automatically denied.
Fighting the Complaint in Court
Once your bankruptcy case reaches trial, the entity that filed the complaint is given an opportunity to prove that you intentionally lied or misled with statements made on your petition. A ruling against you means the judge believed the complainant and you are denied the discharge. A ruling for you means your bankruptcy is granted as it would have been if no complaint were filed.
Keep in mind that a ruling against you could result in more than just the denial of discharge. In some cases, you could face criminal charges for lying on a court document. Dishonesty on bankruptcy documents is considered a federal offense. If your bankruptcy is denied, you have the option of appealing to a higher court.
It is important to remember that bankruptcy is for the honest debtor and the court and trustees take this extremely seriously. If you disclose all of your assets and all of your liabilities then you will be entitled to bankruptcy relief, if you otherwise qualify.
A potential denial of discharge might not always stem from the result of fraud, but could be the result of carelessness. If you do not fully think about what your attorney asks you, then you might overlook an asset that should have been listed.
In many circumstances, a forgotten asset can be included by filing an amendment. Just keep in mind that finding an asset after a Chapter 7 bankruptcy is filed might create a problem because you do not have the right to withdraw the bankruptcy. You may have inadvertently opened up an asset for liquidation.
A major problem can arise if you have several instances of carelessness. Then, even if you were honest, you could appear to be intentionally concealing assets or misleading the court. You could then find yourself facing a denial of discharge because to the trustee or creditor it appears as if you have committed fraud.
This is why it is so important to seek an experienced bankruptcy attorney that will know the right questions to ask you and prepare your case thoroughly. A good bankruptcy attorney may be able to ascertain interests and rights that you have to property that you may not even realize. These could be potential assets in a bankruptcy and it’s best to know about them beforehand. A careless debtor and/or a sloppy attorney is a recipe for disaster!
The most important thing you can do to prevent a denial of discharge and ensure your bankruptcy filing goes as smoothly as possible is to work with an experienced bankruptcy attorney. To learn more or to schedule a consultation, contact the law office of Frank J. LaPerch, PC at 845.942.5500.