Yes! There are no assurances that anyone who applies for chapter 7 bankruptcy will be successful. Whether you live in Austin TX, or any other state, bankruptcy courts decide cases based on many things and cases can be declined for a variety of reasons ranging from procedural errors to eligibility. The most common are discussed below.
Lying About Your Assets
There are strict laws (US Code: 727) on abusing bankruptcy. As per the law, courts can discharge individuals removing all creditor liability (debts) applicable. However, such individuals can't be found to be using bankruptcy to delay, stop or defraud creditors. This encompasses transferring, destroying, or concealing property. In simple terms, you must disclose all assets you own, or your bankruptcy case will be dismissed.
Falsification of assets is a very serious offense capable of having your bankruptcy petition dismissed or rejected when there is proof that you haven't been truthful about your possessions or property. Since individuals applying for Chapter 7 may not intend to lie, there are common instances of bankruptcy cases being rejected because a person didn't know what they should include.
To avoid such a scenario, find an Austin, TX bankruptcy attorney to guide you on what you should/shouldn't include.
Failing to Provide the Necessary Documents
Individuals filing for bankruptcy must provide supporting documents i.e., financial documents, as part of the process. These documents are used as evidence that you can't be able to meet your debt obligations. Some of the documents needed include things like recent tax returns. Your tax records should accompany other documents like real estate deeds, car titles, itemized monthly living expenses, all property and possessions, recent major financial transactions (over the past 2 years), and sources of income. Failing to include all these documents may lead to a bankruptcy petition being rejected.
Given assets and other things like living expenses can be misinterpreted or misreported, you need legal advice to get everything right.
Failing to Meet the Eligibility Criteria
Not anyone who has debt and faces difficulty paying that debt will be able to file for bankruptcy. There are ideal candidates for Chapter 7 bankruptcy. The eligibility requirements are very strict. For instance, individuals must pass specific income tests among other tests.
The income test can be described as a complex evaluation of a person's income sources and if such sources meet the average income in your state for the number of individuals in your household. If you have income that is above the medial income in Austin TX, your petition will be rejected.
The means test establishes affordability i.e., can you pay your creditors? If you can comfortably repay creditors a reasonable amount on a monthly basis, you can't file for Chapter-7 bankruptcy. However, you can qualify for other types of bankruptcy i.e., chapter 13. In fact, individuals who can file for Chapter-13 bankruptcy are automatically denied Chapter -7 bankruptcy.
Failing to Go For Credit Counseling
Individuals who file for bankruptcy must include paperwork (a certificate) that shows they have gone through credit counseling. The certificate must come from an approved credit counseling agency. It should also be within 6 months of applying for bankruptcy. Counseling agencies also need to offer repayment plans. To find an approved agency in Austin TX, or nearby, visit the DOJ website.
Counseling is a mandatory requirement by bankruptcy courts since individuals filing for bankruptcy will still need to get their finances back in order. Credit counseling is mandatory regardless of a person's debt and income levels or disparities. Your personal opinion is also immaterial. Even if you find your debt/s unfair, you must go for credit counseling.
It's common for debt to accumulate unfairly because of high interest and penalties. Emergency expenses and bad judgments can also lead to "unfair debt". Nevertheless, a person filing for bankruptcy must be educated on how they will avoid similar financial situations in the future.
Most importantly, it's not enough to go for credit counseling. You can still have your case rejected if you don't participate. Going along with the agency's proposal without giving any input may be viewed negatively. You need to be involved in the process. However, you are expected to follow the plan the credit agency prepares.
Having Filed for Bankruptcy Previously
Individuals who have filed for Chapter-7 before must wait for 8 years before being eligible to file again. However, if you have filed for Chapter-13 before, you just need to wait for 6 years. If you meet all other requirements but fail to meet this one, your bankruptcy petition will still be rejected.
Making Disqualifying Asset Transfers
You shouldn't transfer your assets to other persons or entities before applying for Chapter-7 bankruptcy if the transfer involves disqualifying assets. This applies mostly if the transfer is meant to make it look like you don't have enough assets to settle your debt.
Bankruptcy Courts appoint trustees who can check to see if recent asset transfers invalidate your petition. A typical example of a disqualifying asset transfer would be transferring a bank account to your child's ownership. Such a transfer will easily look like a coverup.
Do Bankruptcies Get Denied?
Yes! There may be many other reasons why bankruptcies get denied in Austin TX and other places in the US. However, we've summarized the most common reasons why Chapter-7 bankruptcy petitions are rejected.
Considering a petition can be rejected for innocent or small reasons i.e., failing to know what asset to include in your supporting documents, the importance of hiring a bankruptcy attorney in Austin TX can't be overlooked.
Bankruptcy lawyers are the best-placed legal professionals to advise on bankruptcy matters. Most importantly, you need to find one that understands all bankruptcy laws unique to your state. While hiring a bankruptcy attorney can seem like an unnecessary cost, the financial consequences of having your bankruptcy petition being denied are more severe.
What's more, you can get a FREE bankruptcy case consultation from Austin Bankruptcy lawyers with excellent backgrounds & experience so cost shouldn't be a hindrance.