Most people who file for bankruptcy are drowning in debt and want to get that debt discharged. In a Chapter 7 bankruptcy, the debt is discharged in exchange for the debtor relinquishing certain assets, such as their home or their vehicle, in order to repay the debt. In some cases, it is possible that a person files for bankruptcy, gives up their assets, and their discharge is still denied by a judge. To ensure this does not happen, it is crucial that anyone filing for bankruptcy first speaks to a bankruptcy lawyer who can assist them with the process and help ensure their discharge is not denied.
Reasons for Denying a Bankruptcy Discharge
In order to have debts discharged as part of a bankruptcy case, you must be completely honest about everything. That means being honest about your financial situation, your financial history, and remaining honest with the court and your creditors. If you are not honest, your discharge can be denied, but you may still have to give up some of your assets to repay your debts. Some of the most common tactics people try that end up in a denial of discharge include:
- Hiding property: Some people hide property so they do not have to relinquish it upon the discharge of their debt.
- Destroying financial records: Sometimes, a person will destroy things such as banking records to hide a bank account, or their stock portfolio in an attempt to hide assets. The court will likely learn of these assets anyway, and deny the discharge.
- Making false statements: These statements may be in writing, or they may be given orally. Either way, when people are dishonest about their assets, earnings, and debts, it will likely end in a denial of the discharge.
- Failure to explain loss of assets: When a person has no explanation for losing property or money, the court will view them as being dishonest. This loss is nothing to be embarrassed about, and it is always better to be honest about lost assets.
- Failure to complete a course: In many cases, the court requires anyone filing for bankruptcy to attend a credit counseling or financial management course. This is with the hope that the person does not get too far into debt and file for bankruptcy again. When a person does not complete this course, they have not met their obligation and their bankruptcy discharge will likely be denied.
- Violating a court order: Court orders should always be taken very seriously. All courts will look negatively on someone that violates any order and in a bankruptcy case, it is enough to have the discharge denied.
- Failure to disclose a prior bankruptcy: All previous bankruptcies must be reported any time someone files for bankruptcy. A person cannot file for bankruptcy if they have had a Chapter 7 bankruptcy in the last eight years, or a Chapter 13 bankruptcy in the last six years. Failing to disclose this information is also dishonest and could result in a denial of discharge.
If a bankruptcy trustee or creditor learns of any of the above, they will most likely file a complaint to have the discharge denied.
When a bankruptcy trustee or creditor files a complaint, sometimes called an adversary complaint, they are actually filing a lawsuit as part of the bankruptcy case. Within the complaint, they will state why the debtor’s discharge should be denied. Unlike other lawsuits, this complaint does not have to be served to the debtor personally, but can be sent through the mail.
After receiving the complaint, a debtor has 30 days to respond to it. This is done by answering the complaint, or drafting a motion to dismiss. Sometimes, a debtor may use both methods. The answer is a chance for the debtor to respond to the claims made in the complaint. They must answer each one, denying or admitting each statement. A motion to dismiss asks the court to dismiss the complaint because some part of it is insufficient.
Most courts require a debtor to appear in court at least once before their trial begins. These appearances are typically only to schedule pre-trial motions and the trial itself, although debtors will also have a chance to speak with the judge about the lawsuit. It is crucial for debtors to have a lawyer present with them at this pre-trial hearing and during the trial. An attorney will offer debtors their best chance of having their debt discharged.
During the trial, a judge will listen to arguments from both sides, as in any other court case. The burden of proof is on the bankruptcy trustee, creditor, or anyone else that filed the complaint. The burden of proof is not beyond a reasonable doubt, but they must show that the debtor was dishonest with their bankruptcy petition, or that they violated another part of the Bankruptcy Code and should be denied a discharge.
If the judge ruled in the debtor’s favor, the bankruptcy case will continue and the debt will likely be discharged. If the judge rules against the debtor, they will enter a judgment denying the bankruptcy discharge. At this point, the bankruptcy trustee can still take non-exempt property to repay creditors, but the debtor will still owe any debt remaining after those assets are disbursed.
Unfortunately, that is also not always the worst part of having a discharge denied. If the judge believes the debtor was involved in criminal activity, such as bankruptcy fraud, they may face criminal charges if the judge refers the case to the Department of Justice.
Our Florida Bankruptcy Lawyers Can Help get Your Discharge Approved
Many people believe that filing for bankruptcy is a fairly simple matter; unfortunately, this is rarely the case. It is for this reason that if you are considering filing, you must speak with one of our Fort Lauderdale bankruptcy attorneys right away. At Loan Lawyers, we have helped thousands of people successfully file for bankruptcy, and we want to put that experience to work for you. Call us today at (9554) 523-HELP (4357) or contact us online to schedule your free consultation and to learn more about how we can help.
Loan Lawyers has helped over 5,000 South Florida homeowners and consumers with their debt problems, we have saved over 2,000 homes from foreclosure, eliminated more than $100,000,000 in mortgage principal and consumer debt, and have recovered over $10,000,000 on behalf of our clients due to bank, loan servicer, and debt collector violations. Contact us for a free consultation to see how we may be able to help you.