Can the bankruptcy court deny my discharge of my debt?
Yes. In bankruptcy, there are some instances in which a court can deny the discharge of your debt. If your discharge is denied, you will be required to pay the full amounts and balances on your debt, including your medical bills, credit card debt, and amounts owed for a repossessed home or car.
OverviewA court will deny your discharge if you fail to follow the bankruptcy procedures and court rules. It only makes sense that if you want the bankruptcy court to discharge you of your debt, you have to play by and follow their rules. Courts will usually deny your discharge if you fail to do what they told you to do or you did something in a sneaky way so that the court or Trustee could not do their job.
The most common reasons that a court will deny you a discharge when you failed to do what they told you to do is:
You did not provide the required/requested documents.In a bankruptcy, you are required to provide tax returns, bank statements, information about your income, vehicle title/registration, and the deed to your home (if you do not rent) to a Trustee. A Trustee acts as a case manager to review the information you provide and make sure they are true and correct. Under the bankruptcy law (11 U.S.C. *521), the documents must be provided to the Trustee. You, the debtor who wants the discharge, must provide these documents or explain why they do not exist. For example, a retired debtor may not file a tax return because they are not required to do so. It is important to communicate that to the Trustee so that the Trustee knows why a document was not provided. Otherwise, the Trustee believes that you are failing in your duties to provide the requested documents.
***Tip: Make sure to get a list from your attorney or the Trustee of the documents you are required to provide. For my clients, I provide this checklist before you first meet with us. This way, upon our first meeting, you are already organized and on the right track.
You did not complete your credit counseling.In a bankruptcy, you must complete a credit counseling course BEFORE you file for bankruptcy and another course AFTER you file for bankruptcy. Both courses are required. Under the bankruptcy law (11 U.S.C. *109(h)), you cannot be a debtor in bankruptcy unless you completed a credit counseling course during the 180-day period before you filed your bankruptcy petition.
***Tip: Make sure to take a credit counseling course BEFORE you file for bankruptcy. There is a check box on your Petition that will remind you when you did it and ask the date for when you took it. It is a helpful reminder. If you do not take your credit counseling course AFTER you file, the court will send you a reminder. Make sure to complete the course within 5 days and send proof to your attorney or to the Court.
You disobeyed a court order to do or not do something.In some bankruptcy cases, a court will enter an order requiring you to do something. In Chapter 13 cases, for example, the court will require you to provide copies of your tax returns that you file while the case is pending (3-5 years). The court order also requires you to turn over your tax refunds for the years your case is pending. Failure to provide those tax returns or to turn over the tax refund could prevent you from obtaining your discharge.
***Tip: If a Court order is entered on your case, make sure to read it. If you do not understand the order, contact your lawyer.
The most common reasons that a court will deny you a discharge when you did something in a sneaky way so that the court or Trustee could not do their job is:
You sold, transferred, or gave away property so that your creditors couldn*t get it.The Court and Trustee will ask you questions about your property that go back 2 years, so if you transferred any property, gave anything away, or sold anything in the last 2 years, you must admit it. You will also need to provide the name and address of who received the property, what that property was, and the value of the property. For example, if you gave $2,000 to your brother for Christmas, you must disclose that. Failure to explain that could prevent your discharge. You will most likely also be questioned about the $2,000 to determine if it was transferred for a particular reason other than so that your creditors cannot get it.
***Tip: Don*t hide the truth and don*t give away, transfer, or sell anything if you plan to file for bankruptcy. If you did, list it on your bankruptcy documents.
You lied or did other fraudulent acts during your bankruptcy case.The bankruptcy court is a federal court and they take perjury and lying of any sort (including omitting the truth) very seriously. You will also sign your bankruptcy documents stating that you signed the documents under the penalty of perjury. The penalty of perjury is up to $150,000 in fines and up to 15 years in prison. You are also signing stating that the information in your documents is true and correct to the best of your knowledge and belief. If you are lying in your documents or in your testimony at your Trustee meeting, you could face fines and punishment, in addition to the Court denying your discharge.
***Tip: Check and double check your paperwork before you sign it. Ask any questions you have about the documents. Make sure to get a copy from your attorney so you have one for your records. If you find a mistake, let your attorney or the Trustee know immediately.
You have no appropriate answer for what happened to your belongingsIf you did transfer property, give something away, or sold something in the last 2 years, you better have a good answer for where it went. The Court and Trustee do not appreciate that you sold a $7,000 Rolex to some guy from some place. They will be looking for a bill of sale, a name and address, a phone number, and proof that the exchange took place. If a creditor shows up with a picture of you last month with a diamond ring on your finger, you better have listed the ring on your bankruptcy documents and you better have an appropriate answer for where that ring is. Bankruptcy courts do not give discharges to people they do not deem to be truthful.
***Tip: Disclose. Disclose. Disclose. You need to be upfront, honest, and truthful with the Bankruptcy Court and Trustee to obtain your discharge. If you have questions about certain disclosures or actions, consider meeting with an experienced bankruptcy attorney to discuss your options.
You previously filed bankruptcy and received a discharge.In certain instances, you are not eligible for a discharge if you previously filed bankruptcy and received a discharge within a certain time frame. If you received a discharge in a Chapter 7 case previously, you cannot file another case and receive another discharge for 8 years. If you received a discharge in a Chapter 13 case previously, you cannot file another case and receive another discharge for 4 years. While this may not be a sneaky thing you are trying to do, you will not be eligible to obtain a discharge either way.
***Tip: If you previously received a discharge, consider meeting with an experienced bankruptcy attorney to review if you will be eligible for a discharge in this new case. You should have your prior case number or a copy of your prior discharge with you when you meet with an attorney.