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Describing what could lead to a denial of discharge

Most of those filing for Chapter 7 bankruptcy in Salem typically expect their qualifying debts to be discharged. One could argue that they are right in this assumption; after all, the website reports that more than 99 percent of individual bankruptcy cases are granted a discharge. However, there are certain scenarios where the court could choose to deny a debtor his or her discharge. More often than not, objections to discharge are brought by either one’s creditors or the court-appointed bankruptcy trustee handling his or her case.

According to the Handbook for Chapter 7 Trustees issued by the U.S. Department of Justice, there are several reasons why the court would deny a discharge. The most obvious would be in the event of a corporation or partnership seeking Chapter 7 protection, as these types of entities are not permitted to have debts discharged through the form of bankruptcy. Others include:

  •          Concealing property with the intent to defraud another.
  •          Failing to keep adequate financial records.
  •          Offering false testimony or withholding information.
  •          Having no satisfactory explanation as to the loss of one’s assets.
  •          Refusing an order of the court.

If it is discovered that a debtor had either a previous Chapter 7 bankruptcy discharged within the last eight years or a Chapter 13 discharged within the last 6 years, the court may also consider denying a discharge.

What does this it mean for the debtor if his or her bankruptcy is denied discharge? Technically, he or she still remains in bankruptcy, with the bankruptcy trustee still charged with selling his or her nonexempt assets. The difference is that one is still left with all of the original debt he or she brought into the case initially. 

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