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Why could a court refuse to discharge your bankruptcy?

On Behalf of developers | May 4, 2022 | Bankruptcy

As you start the bankruptcy process, you’ll hear and read about the “discharge.” That’s the bankruptcy court’s order that releases you from any liability for your debts that have been ruled to be dischargeable.

The discharge typically occurs in a Chapter 7 bankruptcy once a person has turned over their dischargeable or “non-exempt” assets. Those assets are then liquidated to pay off as much of their debt as possible. 

The discharge generally comes as a big relief to those filing for bankruptcy because once a debt is discharged, a creditor can no longer contact the debtor or otherwise attempt to collect the debt.

When can a bankruptcy court deny a discharge?

It’s easy to confuse the terms “discharge” and “dismissal.” You don’t want your bankruptcy dismissed. That’s what can happen if the bankruptcy court declines to issue a discharge order. This isn’t done (or shouldn’t be) without good reason. 

Discharge denials usually involve wrongdoing by the debtor, whether it was intentional or not. Examples of reasons for a discharge denial include the following:

  • Making false statements about debts, assets and/or income
  • Destroying financial records
  • Hiding property
  • Violating a bankruptcy-related court order
  • Not disclosing a previous bankruptcy
  • Not completing required courses

Note that bankruptcy courts are governed by federal law. That means that if it’s determined that a debtor was intentionally hiding assets, misrepresenting financial information or otherwise being untruthful in court filings, they could be charged with a federal crime.

A complaint typically proceeds a discharge denial

If a bankruptcy trustee or a creditor believes a person is guilty of anything that would prevent a discharge, they need to file a complaint. A person has 30 days to respond to the complaint or file a motion with the court to dismiss it. If you don’t respond in time, your bankruptcy won’t be discharged, even if some of your property has already been taken by the court. 

Bankruptcy can be an important step in getting the crushing weight of debt off of you and getting your financial life in order. However, it’s not a do-it-yourself process. It’s governed by the U.S. Bankruptcy Code, so there are myriad laws to understand and abide by. Having experienced legal guidance can help you avoid unnecessary problems and get through the process as smoothly as possible.

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