The reason you file bankruptcy is for a fresh financial start. However, a misstep in the process could create issues that threaten the discharge of your debt.
According to the U.S. Bankruptcy Court for the Western District of Kentucky, here are three ways you could end up with debt after you file bankruptcy.
1. Denial of discharge
Your bankruptcy may be in danger if you defraud a creditor, conceal property, lie under oath or fail to obey any court order. If the court enters a denial of discharge, it applies to the entire proceeding.
2. Nondischargeable debt
A nondischargeable debt may be the result of an objection from the creditor. Judges often rule in favor of a creditor if the debt is a credit card purchase from the 90 days before you filed.
If you had to use the card to buy food for your family, that may be fine. However, if you make a major purchase of a luxury item or take out a large cash advance, the court may agree with the creditor that you never intended to pay that back and only made the purchase because you were declaring bankruptcy. You can defend your purchase in court, but it is better not to make the purchase at all and avoid the risk.
3. Case dismissal
A case dismissal is a court order that ends your bankruptcy case. Unless the court has already entered a discharge order before the dismissal and the judge does not revoke it, your automatic stay also comes to an end. So, creditors can once again begin trying to collect on your debts.
To avoid a case dismissal, you should follow all instructions carefully. Attend your 341 meeting, produce the information your trustee requests and be honest when you answer the trustee’s questions. Your creditors could also appeal to the court to have your discharge dismissed instead of requesting that the court make a single debt nondischargeable.
You can appeal the dismissal or seek reconsideration, but you only have 14 days from the day the court enters the dismissal order.
If you follow the guidelines carefully and act in good faith, your fresh start is waiting for you on the other side of the process.