Why Would a Bankruptcy Court Deny a Chapter Seven Case?

by Luke Homen

There are many reasons why a bankruptcy court could deny your Chapter 7 bankruptcy filing. When you work with Convenient Bankruptcy, you might learn that this isn’t your best bankruptcy option. If it is, we’ll do everything possible to make your case successful. We will discuss Chapter 7 bankruptcy and the obstacles you may find.

If you’re facing financial hardship, bankruptcy may be an option. Chapter 7 may or may not be your best option. The Chapter 7 Convenient Bankruptcy law firm will help you explore your choices and determine which one is right for you. Chapter 7 lawyer Luke Homan helps individuals and their families resolve financial challenges to achieve financial freedom as evidenced in their client reviews. Call us at 405-296-0069, and a Chapter 7 attorney will contact you.

How Does Bankruptcy Work?

Bankruptcy is a federal legal process that allows you or your business to state that you’re unable to pay your debts. Through bankruptcy, you may be entitled to discharge debts completely (depending on their type), or you must pay them over time.

What is Chapter 7 Bankruptcy?

Under Chapter 7, your assets (except property that’s exempt under federal or state laws) would be sold to pay your debts, and those that remain would be discharged. On the other hand, Chapter 13 bankruptcy case involves filing a repayment plan. When you pay off your obligations in three to five years, those debts will be behind you, and you can keep your equity in a home or vehicle.

Why Would a Chapter 7 Bankruptcy Case Be Rejected

Many issues can derail a Chapter 7 filing. They include the following.

1. Failing the ‘Means Test’

Part of the Chapter 7 process involves a “means test,” which considers your income and expenses. It’s to screen out people with enough disposable income to pay their debts. This test won’t apply if your financial problem is mostly from your business.

If you file for Chapter 7, you’ll need financial information from the prior six months. Ideally, your household income will be less than Oklahoma’s median income (the figure that would be in the middle if we list all Oklahomans’ incomes from top to bottom).

The median changes depending on household size. If you file in 2024, it varies from $55,362 for one person to $91,528 for a family of four. Significant income changes in the last six months, such as a lost job, will be considered in the calculation. If your income is less than the median, you passed the test.

If your income is higher than the median, “allowable expenses” will be considered — as long as your can document them! They include the following:

• Healthcare
• Childcare
• Housing
• Transportation
• Food
• Utilities
• Life Insurance
• Clothing
• Some Other Specific Necessary Expenses

If these are deducted from your income, what’s left is your disposable income which could be used for paying your debts. Though your household income is higher than the state’s median, you may qualify for Chapter 7 if you have enough of these expenses.

A Chapter 7 attorney can guide you through the process so you’ll have the best chance of bankruptcy protection. But if your disposable income is too high, you won’t qualify for Chapter 7.

2. Incomplete or Inaccurate Paperwork

A Chapter 7 petition is complicated and requires a lot of information, It includes numerous forms and schedules. Not providing important details about your income, assets, or liabilities may be the difference between approval and denial. Small mistakes or not including documentation may cause a rejection

3. A Lack of Transparency

Bankruptcy courts have no tolerance for dishonesty. Hiding assets, falsified financial records, or misleading creditors are considered fraudulent activities. They can result in the denial of your filing and criminal charges.

It is essential to tell the whole truth – especially to your bankruptcy attorney!  Your conversation with your attorney will be covered under the attorney-client privilege – and if your attorney doesn’t know your whole story, he or she can’t give you the best advice!

4. Recent Discharges

If you’ve filed for bankruptcy protection in the prior eight years you’ll be rejected.

5. Credit Counseling & Financial Management Classes

You must get credit counseling from an approved agency prior to filing for Chapter 7 bankruptcy, and take a class on Financial Management shortly after you file bankruptcy. These are to help you budget your income and expenses and use debt management strategies.

Failing to attend these classes and properly file your certificates of completion will cause your filing to be rejected.

Might Chapter 7 Bankruptcy Be Right for You?

If you or your business is going through financial difficulty, Chapter 7 bankruptcy might be an option. But you must take the necessary steps to make it happen. Time speaking with a Tulsa Chapter 7 bankruptcy lawyer is well spent because we can talk about the process and how we can help. Schedule a consultation with the Chapter 7 Convenient Bankruptcy law firm by calling us at 405-296-0069 or contacting us online to set up a time to talk. You’ll be glad you did.