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When can a discharge be denied in a Chapter 7 bankruptcy?


Chapter 7 bankruptcy is a common strategy for Texans who are overwhelmed by consumer debt and would like to move on with debt relief. However, it is not automatic that the discharge will be given. There are laws when filing for Chapter 7 and, if there is a violation, the discharge can be denied. Understanding the criteria for this denial is imperative before filing so the person can take steps to either avoid denial of discharge or find another way to get out of debt.

If the debtor transferred, destroyed or concealed property within one year prior to the filing or property of the estate while the bankruptcy is in progress, then this can be grounds for denial. The debtor is not allowed to conceal, falsify, destroy or fail to maintain financial records unless the circumstances justify it. The debtor cannot do the following in a knowing and fraudulent manner: make a false oath or account; present or use a false claim; give, offer or get money, property or advantage for an act or forbearance; withhold recorded information related to the property or financial matters.

If the debtor cannot explain a deficiency in available assets in order to meet liabilities in a satisfactory way, the filing can be dismissed. The debtor must obey orders of the court to testify unless it was to respond to a material question or give testimony regarding a matter that the debtor asserted his or her Fifth Amendment privilege. The debtor cannot have received a discharge via Chapter 7 or Chapter 11 within the prior eight years of the new petition. The debtor cannot have had a Chapter 12 or Chapter 13 discharge within six years of the new petition unless the case was satisfied in full or 70 percent was satisfied with the plan pursued in good faith.

The debtor will not receive a discharge if a letter was executed by the debtor and approved by the court after relief was ordered. It is required to complete the financial management course. Finally, criminal proceedings simultaneous to the filing can be cause for the discharge to be denied. Those who are considering filing for Chapter 7 must understand that they are not automatically granted the right to discharge debt simply by the nature of filing. To make certain that all the criteria is met to file for Chapter 7 and discuss other options if it is not, it is important to contact a lawyer as soon as possible.

Source: irs.gov, "Section 9. Chapter 7 Bankruptcy (Liquidation) -- Discharge," accessed on Feb. 28, 2017

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