When could my discharge be denied?

The bankruptcy discharge is what gives individuals a fresh start.

The court issues a discharge that frees individuals from repaying their debts. Many people believe that they will receive their discharge automatically. And sometimes that is the case.

However, there are a few instances that could result in the bankruptcy court denying someone’s discharge. Understanding when courts might deny a discharge can help individuals avoid those situations and protect themselves. So, here are the most common reasons that lead to the denial of a discharge.

1. Not following the instructions in the bankruptcy code

Individuals seeking a bankruptcy discharge must:

• File all required schedules and statements
• With the exception of chapter 7 cases, file all of their tax returns 
• Attend mandatory pre-petition credit counseling
• Complete a follow-up post-petition class on managing finances

If an individual sidesteps these obligations, the bankruptcy court will deny them a discharge.

2. Hiding property to protect it

Many people fear that they will lose their property if they file bankruptcy, especially if they file Chapter 7. And to some, it might seem like a good idea to hide property or not list assets when filing bankruptcy to protect their assets.

However, hiding any property from the bankruptcy estate could result in criminal charges of fraud, including a fine, imprisonment, or both, as well as a loss of a bankruptcy discharge.

3. Destroying financial records

Bankruptcy comes with a lot of emotions, with shame being one of the most common emotions people experience.

There is no reason for individuals to feel embarrassed when they take charge of their finances and file bankruptcy. Nevertheless, it is a persistent companion of debt.

This embarrassment might be part of the reason that some people destroy records of things they bought. It might also lead them to provide misleading statements about their finances or income.

In the eyes of the court, concealing information is just as dangerous as concealing assets. 

4. Recently receiving a discharge in the past

While it is true that individuals can file bankruptcy as many times as they wish, there are waiting periods. Individuals cannot receive a discharge if they obtained:

• A discharge through Chapter 7 in the last eight years
• A discharge through Chapter 13 in the last four years

Filing again too soon or not informing the court about a past bankruptcy discharge can lead to a denial.

Honesty is key in bankruptcy

The common phrase “honesty is the best policy” applies to bankruptcy as well. Honesty is one of the most important things to remember when filing bankruptcy. Telling the truth to creditors and the New Mexico bankruptcy court is critical to ensure that individuals find the debt relief they need.