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Refusal to grant discharge when filing for bankruptcy, Part II


Texans are not immune to unexpected life changes and the need for debt relief. Filing for bankruptcy is a method with which financial challenges can be mitigated and a person can get back into a better position to move forward. There is the possibility that there will be a refusal by the court to grant a discharge. Part I discussed some of the circumstances in which a discharge might be refused. This post will discuss the remaining reasons under the law.

Debtors are required to obey lawful orders of the court. If there is a refusal to -- respond to material questions or testify, testify to avoid self-incrimination after having been granted immunity or testify on a ground apart from the properly invoked allowance to avoid self-incrimination, then the court might refuse to grant discharge. If the debtor has violated the law against hindering, delaying or defrauding a creditor by destroying, mutilating, falsifying or failing to preserve relevant information on or within one year prior to the date of filing or while the case -- linked to another case -- was underway and it concerns this applicable law or the Bankruptcy Act and an insider, the discharge can be refused.

Discharge can be refused if there was another discharge within eight years prior to the new filing and it was granted under specific sections of the Bankruptcy Act. Other sections of the law will require that there was no filing and discharge within six years of the new filing unless the plan totaled a minimum of -- 100 percent of the allowed unsecured claims or 70 percent of these claims and the plan had been proposed in good faith by the debtor and included the debtor's best effort. The court can also approve a written waiver of discharge if it was executed by the debtor after the order of relief was made.

Debtors might not realize that they are required to complete an instructional course about how to manage their personal finances. If this is not completed, the discharge can be refused. The U.S. trustee, a trustee and a creditor are able to object to a discharge being granted. Obviously, the combination of reasons for which a discharge can be refused is complicated. It is with this in mind that any person facing a troublesome financial situation should make sure to understand the how a discharge might be refused and take steps to avoid that eventuality with help from an experienced attorney.

Source: gpo.gov, "Title 11 -- Bankruptcy -- 727. Discharge 6-12," accessed on Feb. 1, 2016

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