When a financially distressed individual makes the decision to pursue a fresh start via Chapter 7 bankruptcy, it's important for them to understand that while the process will likely prove to be both mentally and even physically exhausting, it can also prove to be potentially life changing.
That's because if a discharge is ultimately granted, they will be released from personal liability for the majority of their debts and free from the possibility of collection actions being taken by creditors in conjunction with these debts.
As wonderful as the possibility of a discharge undoubtedly then seems, it's important to understand that the bankruptcy court can decide to deny this relief if certain grounds are present.
Specifically, the law permits the denial of a discharge in a Chapter 7 case if a debtor does any of the following:
- Fails to maintain or produce adequate financial records or books
- Fails to provide a satisfactory explanation as to any loss of assets
- Fails to obey an order of the bankruptcy court
- Fails to complete a required financial management course
- Commits a bankruptcy-related offense, including perjury
- Conceals, destroys or fraudulently transfers assets that would have otherwise become part of the bankruptcy estate
While the following information is undoubtedly unnerving, those either mulling or actively involved in the Chapter 7 process should understand that these are incredibly narrow grounds that require very deliberate actions. In other words, they aren't designed to blindside unsuspecting, honest and otherwise diligent bankruptcy filers.
Indeed, statistics from the U.S. Bankruptcy Courts indicate that absent dismissals and conversions, Chapter 7 filers receive a discharge over 99 percent of the time.
If you have questions about Chapter 7 or would like to learn more about your debt relief options, consider speaking with a skilled legal professional.