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What are possible obstacles to a Chapter 7 bankruptcy discharge?

On Behalf of | Jan 6, 2023 | Bankruptcy |

For New Yorkers who are experiencing financial struggles, bankruptcy is often a worthwhile option to consider. People who do not own a home or have significant property that would be liquidated can benefit greatly from the Chapter 7 discharge.

Despite its positives, a common misstep that people make when using Chapter 7 is failing to fully understand their responsibilities under the plan. Simply because a successful Chapter 7 clears unsecured debt and lets people keep various properties that are below a certain value does not avoid all obstacles. From the start, it is imperative to know the value of professional help.

What should I know about a bankruptcy discharge and potential challenges?

When the debts are discharged, creditors are no longer legally allowed to pursue payment. If a person had major credit card debt or owed for medical treatment and faced constant calls, messages and letters from creditors about the late or missed payments will stop. Statistically, more than 99% of people who file for Chapter 7 get a discharge.

With that said, there are times when objections can be lodged trying to prevent the discharge. There can also be a motion to receive an extension for the party in interest deciding if they should object. In most cases, the discharge is granted relatively quickly.

Some reasons why a Chapter 7 discharge might be denied include the debtor not providing sufficient financial information; not explaining why they lost a certain number of assets; committing perjury; failing to follow the bankruptcy court’s lawful orders; if they transferred, concealed or destroyed property that might have been liquidated; or simply did not take the required financial management course.

The court might call some debts into question. For example, if a person made a series of large purchases not long before they decided to file for bankruptcy, this could look suspicious and jeopardize the case.

It could have been easily explainable such as being done as part of a work necessity, for a home or for their children. In some cases, they simply made a mistake and bought things that they did not need and were already considering bankruptcy. The bankruptcy court will scrutinize unusual spending when it decides whether to grant the discharge. It might decide not to do so.

Seeking qualified and experienced help can prevent problems with Chapter 7

Many people might think they can handle the bankruptcy process themselves. This is especially true with a Chapter 7 filing where it seems as if they simply need to follow certain steps and complete the process. That can lead to costly mistakes.

People can restart their financial lives with a successful bankruptcy. The key is completing all the requirements to get the discharge. Consulting with professionals who have been helping people through tough financial times for nearly four decades can be a crucial aspect of clearing debt and moving on.