Many people find relief from creditors and debt by filing for bankruptcy. However, not all bankruptcy petitions are accepted by courts. It is important to know why your bankruptcy petition could be denied before beginning the bankruptcy process. This allows you to avoid some common mistakes. Below are the top three reasons why a bankruptcy petition is denied.
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Falsification of Assets
U.S. Code § 727 is very clear about abuse of the bankruptcy system. It states that a court may grant a discharge, which absolves a debtor of liability for debts, unless the individual is filing for bankruptcy to hinder, delay, or defraud a creditor. This includes destroying, transferring, or concealing property of the debtor or property of the estate. This means that you must be upfront about all of your assets.
The court system takes falsification of assets very seriously and will dismiss or reject your petition if it finds that you have not been forthright about your property or possessions. It may not be the case that you are trying to withhold information about your assets; it just may be that you are not sure what to include. Many people seek legal assistant with bankruptcy petitions for this very reason to ensure they disclose any information necessary.
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Failure to Provide Proper Documentation
When you file for bankruptcy, there is a series of financial documents that you will need to provide. The financial documents act as proof that you are not able to pay creditors. For example, you will need to provide your tax returns. Since 2005, tax returns have been a staple document that a debtor needs to provide in order to be considered for bankruptcy.
You will have had to file tax records for the two years prior to filing your bankruptcy petition. You will also need to collect documents regarding the information listed below.
- Itemized income sources
- Major financial transactions over the past two years
- Monthly living expenses
- Property, including all assets and possessions
- Real estate deeds
- Car titles
- Loan documents
Failure to include these items may be the reason your bankruptcy petition is denied. Be sure to collect these items and submit them along with your petition.
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You Don’t Meet Bankruptcy Eligibility Criteria
Since the 2005 bankruptcy reform, there are strict standards for being eligible for bankruptcy. To qualify for Chapter 7 bankruptcy, you must pass an income and means test. The income test is a complex analysis that boils down to comparison between your income and the median income in your area combined with the number of people in your household. If you are above the median income, it could mean your bankruptcy petition is denied.
The means test determines whether you can afford to pay your creditors. Generally, this means figuring out if you can afford to pay creditors $100 a month – if you cannot, you may be able to file for Chapter 7 bankruptcy. If you cannot, you may be able to file for Chapter 13 bankruptcy instead.
Find Help with your Bankruptcy Petition
The complexity of the bankruptcy petition alone is enough to make some Plano residents hesitant to file for bankruptcy. But an attorney can help make the process simpler for filers by helping them throughout the way. A lawyer can also help if your bankruptcy petition is rejected.
Don’t face that battle alone! Call Warren and Migliaccio today at (888) 584-9614, or use our online contact form to set up your free consultation.