If you are dealing with overwhelming debt, and all the other options are off the table, you might consider filing for bankruptcy. Bankruptcy should not be considered a failure in any way — rather, it can provide you with the fresh financial start you need.
However, it is not uncommon for the bankruptcy court to deny your petition. If this happens, you will want to understand the reasons behind your bankruptcy denial so you can determine your next course of action. Here are three common reasons why most bankruptcy claims end up in denial
Any actions, or inaction, that are aimed at defrauding your creditors will automatically result in the denial of your bankruptcy claim. These include removing or transferring assets, hiding your assets or withholding crucial information.
Besides the denial, bankruptcy fraud is also an offense with serious penalties if this is discovered.
Failing to complete instructional courses
Under the U.S Bankruptcy Code, you will be required to complete two mandatory courses when declaring bankruptcy. The first course is the credit counseling course that you must sign up for and complete before beginning the bankruptcy process. The second is the financial management course that you must complete as a condition before getting a discharge. Failing to complete these courses could jeopardize your bankruptcy claim.
Filing the wrong bankruptcy
The two main types of consumer bankruptcies are Chapter 7 and Chapter 13 bankruptcies. Chapter 7, also known as liquidation bankruptcy, is ideal when you are dealing with unsecured consumer debts like utility bills, medical bills, unpaid rent, credit card charges and personal loans. Chapter 13, on the other hand, is designed for reorganizing your debts and coming up with a manageable repayment plan. It is typically meant for discharging secured debts and you must have stable income to keep up with your repayment plan. Filing the wrong type of bankruptcy will certainly lead to a denial.
When you file for bankruptcy, there is no automatic guarantee that your claim will be successful. Find out how you can avoid costly pitfalls while declaring bankruptcy.