Millions of Americans, from ages 19 to over 90, file for bankruptcy every year with chapter 7 bankruptcy being the most popular of them all. For your application to be approved, you must pass the means test and also get your filing reviewed by a judge. Just because you passed the means test, it doesn't necessarily mean your application will be approved. This article will look at 3 common reasons, with historical precedence, for why your chapter 7 bankruptcy application may still be denied.
Reason 1: Failure to Explain the Debt
When filing for chapter 7 bankruptcy, all of your paperwork must be detailed. A judge will want to know not only how much you owe, but also why you owe the specified amount. For example, if you took out a loan, what did you use the money for? If you cannot explain the debt, your application may be denied like in the case of In re Tanglis, which happened in 2006. This is because the judge may find that your filing constitutes abuse. There is a possibility you have stored the money elsewhere before filing for bankruptcy.
To prevent this from happening to you, make sure you provide detailed records regarding where all of your money went. For example, show receipts of failed investments, credit card balances and statements and also other any paperwork capable of explaining where you spent cash advances and other loans. Your bankruptcy attorney should review your application before you file it to determine whether there are any inconspicuous debts that need to be explained.
Reason 2: Voluntary Unemployment Leading to Inability to Pay Back Creditors
To ensure you are not taking advantage of the bankruptcy courts, the judge must see you have made an effort to pay back your creditors. If you were only able to pass the means test because you voluntarily gave up employment without a good reason, your application will also be dismissed and rejected, which is what happened in the case of In re Richie.
If you are unemployed during the time of the filing, you don't want the judge to think you are trying to take advantage of the system. Provide information regarding why you are unemployed. For example, if you are injured and can no longer work, provide further details. Show proof you have actively sought out employment opportunities as well. In short, your bankruptcy attorney will want to prove you are not voluntary unemployed, and that your unemployment is a result of a series of unfortunate circumstances.
Reason 3: Failure to Explain Where Money from Personal Injury Settlements or Home Refinancing Went
If you had any money coming in, you must be able to provide a paper trail showing where the money went. This wasn't the case in In re Bozeman. The defendants were unable to account for where the money went, which shows that they did not make a reasonable effort in paying back their creditors.
Much like the first reason, you must make sure that you have a detailed record of where your income and where any other money given to you has gone. Simply stating that you have spent it will not be sufficient. If you took an unnecessary trip, you should still prove that you did indeed take the trip. For example, show hotel receipts, plane tickets, and even transit stubs to prove where the majority of the money went.
Conclusion
The application process for filing for chapter 7 bankruptcy is long and tedious. You definitely do not want your application to be rejected or denied simply because you forgot to include a receipt or some paperwork. To avoid getting your application denied, speak with a bankruptcy attorney to determine whether your application is complete and thorough. An experienced bankruptcy attorney will have already studied previous cases, and will know what works and what doesn't.
Share8 July 2015
Hello, my name is Neil Gamford. Welcome to my site about bankruptcy proceedings. After my divorce, I was left near penniless and without a place to stay. I was paying all of my income to alimony and my remaining debts. Although I had a solid payment plan in place, it was getting difficult to cover my financial obligations without a home. Luckily, I met with a bankruptcy attorney, who helped me find a way to discharge my debts and start over. I hope to share the information I learned throughout that process with you through this site. Please feel free to visit anytime.
