June 17, 2022

Signs Your Chapter 13 Could Be Denied

A debtor’s bankruptcy case involves a debtor seeking reprieve from debts that have become unmanageable and to protect his assets. Bankruptcy may be the only way out in certain circumstances and provides a fresh start to the honest debtor in unfortunate circumstances.

Chapter 13 refers to U.S. bankruptcy proceedings in which a debtor is required by law to reorganize their financial status under the approval and supervision of bankruptcy courts, trustees, and bankruptcy judges.

Unlike Chapter 7 bankruptcy, in Chapter 13 type of bankruptcy, you are allowed to maintain your non-exempt assets. Still, the debt is restructured to allow for the spread of payments over a designated period, typically three to five years. These repayments are collected from your disposable income through a bankruptcy trustee whose fiduciary duty is to redistribute them to the creditors.

At the end of the period, the remaining debt is then discharged if you meet the terms of the agreement. These terms offer your reprieve during a difficult financial time since creditors cannot take any actions on assets to collect more than what the bankruptcy court order highlighted during this period.

Signs Your Bankruptcy Case 13 Could Be Denied

Under chapter 13 of bankruptcy rules, debtors become ineligible to file bankruptcy if the bankruptcy court finds them guilty under the following provisions.

Having too much debt

According to the United States courts, The United States bankruptcy code limits debts, capping at $1,184,200 on secured debts, and $465,275 on unsecured debts. These amounts are continuously adjusted to cater to inflationary movements. Therefore, having too much debt will deny debtors Chapter 13 eligibility.

Inadequate disposable income

Chapter 13, sometimes known as a wage earner’s bankruptcy, highlights that debtors must have sufficient and regular income to qualify for bankruptcy. This proves your ability to meet your living expenses while funding payments per the debt repayment plan.

The source of income, though not necessarily offered through employment, should be stable, regular, and reliable. Disability, unemployment, and social security benefits also count as income. You can also include your spouse’s remuneration even if they do not jointly file for bankruptcy. Your spouse’s money augments in catering to the household’s living expenses.

Failure to file tax returns

Failure to file any state law or federal law tax returns can hinder the approval of your chapter 13 bankruptcy filing. The bankruptcy court requires proof of adequately filed tax returns for four years, providing a seven-day grace period for a year of bankruptcy filing that may have been missed. Copies of the filed returns are then submitted to the trustee before the meeting with creditors.  

Repeat bankruptcy filing

If debtors have filed for bankruptcy before, another chapter 13 discharge claim can be denied for two years. Once this time has passed and you meet all the stipulated requirements, the United States courts dictate that you must wait 180 days after dismissal to become eligible again. Other rules may apply if you previously received a discharge.

If you complete your payment plan before this time elapses, you will still be indebted to any pending balances on unsecured nonpriority debts.

Non-payment of bankruptcy court filing fees

Debt.org states that a bankruptcy case fee of $310 is paid to cater to your case’s administration. This money should be paid to the bankruptcy court while filing. However, a waiver may be placed or a request to the bankruptcy court to have the same staggered in monthly installments.

Incompletion of mandatory credit counseling courses

Chapter 13 stipulates that debtors must initiate and attend credit counseling within the first six months of filing to be eligible for bankruptcy. This counseling gives an attendance certificate at the end of the course to ascertain that you have completed the program, which must be filed in bankruptcy courts within 15 days of your petition for a case to be discharged.

Non-attendance of creditor meetings

Known as a Meeting of Creditors, mandatory hearings with creditors are required once you file bankruptcy. During the hearing, proof of identification and financial affairs should be provided.

You will be interrogated under oath, and the trustee or lenders shall institute a repayment plan. Non-attendance at these meetings disqualifies your discharge claim.

Non-adherence to the payment plan

A chapter 13 bankruptcy filing allows you to retain your exempt property while repaying a portion of the debt through an installment plan, usually lasting three to five years.

Even before official confirmation of the credit plan, the scheduled payments must be made regularly and on time for the bankruptcy courts to allow discharge.

However, if you fail to meet these obligations within one month of declaring bankruptcy, the bankruptcy court will deny your bankruptcy petition discharge claim.

Bankruptcy fraud

This is the act of falsifying information while filing for bankruptcy discharge. Honesty and accuracy in financial disclosure are paramount to completing your bankruptcy paperwork.

Any pretenses in the paperwork while disclosing income, assets and their value, or liabilities, and the bankruptcy courts will make a judgment, dismiss your bankruptcy case as actual fraud, and possibly revoke any previously discharged file. Any loss of assets should be reported and explained to the trustee.

If, after due diligence, the trustee suspects a false listing of assets, they will file an adversary proceeding against you. The courts will then report you to the United States Trustees office for further investigations and possibly charge you with a criminal offense.

Get The Best Bankruptcy Attorney in Media, PA

Debt and creditors don’t need to control you. Promptly seek counsel to ensure you follow the correct legal procedures and have the best chance of approval.

Contact Siddons Law Firm today to explore the different bankruptcy solutions available for you. We’ll help you navigate the bankruptcy process and secure the most favorable outcome in your case. Call our attorney today at 610-255-7500 or email us at msiddons@siddonslaw.com to schedule an appointment today.