If you are an Austin TX resident who has trouble repaying debt, chapter-7 bankruptcy is an option. While the chances of being successful are high, a discharge isn't guaranteed.
99% Of individual debtors in the US have their debts discharged in Chapter-7 bankruptcy cases. This excludes converted and dismissed cases. In many cases, bankruptcy courts issues discharge orders early unless a complaint objecting to a motion or discharge is filed.
Why Would a Chapter 7 Bankruptcy be Dismissed?
There are several reasons why Chapter7 bankruptcies are dismissed. These reasons can be categorized into two, namely, dishonesty (on the part of a debtor) and honest errors.
Most dismissals can be linked to dishonest debtors who may want to hide critical information to avoid paying all or some of their debt. However, Chapter-7 petitions demand honesty. What's more, bankruptcy courts use professionals to assess eligibility and other requirements and submissions needed for Chapter-7 filing.
Suppose you hide a source of income, file for bankruptcy to avoid repaying a creditor, transfer assets just before filing for bankruptcy, and engage in other related dishonest activities. In that case, you should expect to have your case rejected. Hiding assets, lying about your finances, keeping inadequate financial records, and/or destroying property will likely to get your bankruptcy case dismissed before getting a discharge.
Lying or engaging in fraud-like behavior prior to applying for bankruptcy or during the application process will not only get your case dismissed. You risk committing serious crimes that may result in hefty fines/penalties and/or jail time.
Austin, TX residents, filing for Chapter-7 should talk to a bankruptcy attorney first to avoid dismissal and other serious consequences.
You can be 100% honest but still, have your case dismissed based on technicalities. The 1% of Chapter-7 bankruptcy applicants have their cases dismissed for technical reasons such as;
Failing means test: As part of the eligibility criteria for Chapter-7 bankruptcy, you must have income that passes a certain threshold. For Austin, TX residents, for instance, you need to have income that is lower than the median state income to qualify for Chapter-7 bankruptcy. Bankruptcy courts consider your average income for the past 6 months against median state income for a household like yours. The means test is meant to ensure individuals who have some leftover income don't misuse the bankruptcy process.
Failure to attend mandatory credit counseling: Chapter-7 bankruptcy applicants must go through mandatory credit counseling before filing. The course is meant to teach potential applicants on credit matters to prevent similar occurrences in the future. On completion, you should get a completion certificate which is filed in court alongside other bankruptcy documents. Ensure you go to a recommended credit counseling agency. A certificate won't matter if the agency isn't acceptable.
A seasoned bankruptcy attorney in Austin, TX can direct you to a recommendable credit counseling agency whose completion certificate is recognized.
Failing to provide all the necessary supporting documents: You must provide a variety of documents when filing for Chapter-7. These documents include but aren't limited to bankruptcy petition schedules, tax returns, debt information, and pay stubs. You'll also be required to submit many other documents to support a unique case. Omitting crucial documents can lead to a dismissal.
Bankruptcy courts appoint trustees who may have different documentation requirements. The documents also need to be up-to-date. Failing to submit adequate valid documents can lead to a dismissal. For detailed information on what should be submitted for a unique case, speak to a bankruptcy lawyer.
Failing to pay applicable fees: Bankruptcy isn't a free process. You need to pay applicable filing fees to the bankruptcy court in question. While you may get these fees waived if you don't have any income and apply for a waiver, there are no assurances. Bankruptcy courts gladly dismiss bankruptcy cases where there is no fee waiver, and an individual hasn't paid.
Failing to attend creditor meetings: You should attend mandatory hearings with trustees and creditors. These meetings allow creditors to ask questions. Debtors also present proof during creditor meetings. While creditors can skip such meetings, failing to attend these meetings as a debtor will result in a case dismissal.
Alternatives: What Is Your Option When Your Chapter 7 Bankruptcy Case is Dismissed?
While there are people who file alone without seeking legal help and succeed, seeking legal advice can prevent your case from being dismissed. Unique cases should be pursued with legal assistance. You can simply talk to a bankruptcy lawyer before proceeding. Most seasoned lawyers offer free initial consultations that can reduce your chances of failure.
If you are unlucky and fall within the 1% of individuals whose Chapter 7 cases are dismissed, you have some options.
Chapter 13 Bankruptcy
If you aren't successful with Chapter 7, you can consider chapter 13. The eligibility requirements for Chapter-7 may be impossible to meet for some people. You may also apply and get your case dismissed. The reasons can range from having income that is higher than the state's median income to other technical reasons discussed above.
In some cases, you can choose to prove that the technical reasons were unfair. You need a bankruptcy lawyer to advise you accordingly. If your case is rejected because you are believed to have more income than disclosed, you can show how your expenses make it impossible to repay your debts.
Many chapter-7 bankruptcy cases are converted to chapter-13. In Chapter-13, debtors need a repayment plan. If a trustee recommends that your bankruptcy case be converted, you can accept dismissal or apply for Chapter 13 instead. You need a seasoned bankruptcy to make an informed decision based on your case.
The above information highlights the percentage of Chapter-7 bankruptcies that end up being dismissed, the reasons for rejection and what to do about it. If you aren't among the 99% of people in Austin TX that apply for chapter-7 successfully, talk to a lawyer. In fact, the process of applying for Chapter-7 should begin after consulting an experienced Austin bankruptcy attorney if you can't afford to have your case dismissed.
You need specialized state and federal bankruptcy knowledge to go through the process successfully if your case isn't typical.