Can Chapter 7 Bankruptcy Be Denied?

Filing for Chapter 7 bankruptcy can offer much-needed relief when you're overwhelmed by debt. But it’s not always a guarantee. In some cases, a bankruptcy court can deny your Chapter 7 discharge or dismiss your case entirely.

Understanding the reasons why a Chapter 7 case might be denied can help you avoid costly mistakes and ensure you’re positioned for a fresh financial start.

What Is Chapter 7 Bankruptcy?

Chapter 7 bankruptcy, sometimes called “liquidation bankruptcy,” allows eligible individuals to discharge most unsecured debts, such as credit cards, medical bills, and personal loans. In exchange, some non-exempt assets may be sold to repay creditors.

But before a discharge is granted, the bankruptcy court reviews your case to ensure you meet all legal requirements.

Yes, Chapter 7 Bankruptcy Can Be Denied

There are two main ways your Chapter 7 case can be denied:

• Dismissal of the case: This happens before a discharge, usually because the court finds you’re not eligible for Chapter 7 relief.

• Denial of discharge: The court may allow your case to proceed but ultimately refuse to discharge your debts if you’ve acted in bad faith or violated the Bankruptcy Code.

Let’s explore both scenarios in more detail.

Reasons for Chapter 7 Case Dismissal

1. Failure to Pass the Means Test

Chapter 7 is designed for individuals with limited income. If your income is above the New York median and you fail the means test, you may be ineligible, and your case could be dismissed or converted to Chapter 13.

2. Previous Bankruptcy Filing

If you’ve already received a Chapter 7 discharge within the past 8 years or a Chapter 13 discharge within 6 years, you may be barred from filing again.

3. Failure to Complete Required Credit Counseling

You must complete a court-approved credit counseling course before filing. Failing to do so can result in automatic dismissal.

4. Filing Errors or Missing Documents

If your petition is incomplete or missing important financial information, the trustee or judge may dismiss your case for failure to comply with court rules.

Reasons for Denial of Discharge

Even if your case proceeds, your discharge can be denied for several serious issues:

1. Fraud or Misrepresentation

Lying on your bankruptcy petition, concealing assets, or transferring property to avoid liquidation can result in denial and possibly lead to criminal charges.

2. Failure to Keep or Provide Records

The court requires accurate financial records. If you fail to maintain or produce them, your discharge may be denied under Section 727 of the Bankruptcy Code.

3. Refusal to Obey Court Orders

Failing to comply with the trustee’s requests, ignoring the 341 meeting of creditors, or not cooperating with the investigation may result in denial.

4. Asset Destruction or Concealment

Destroying or hiding property with the intent to defraud creditors is a major violation and will disqualify you from receiving a discharge.

What Happens If Chapter 7 Is Denied?

If your case is dismissed, you’ll still owe your debts and may be barred from refiling for a certain period. If your discharge is denied, you won’t get relief from your creditors, even though you went through the process.

In both cases, creditors can resume collections, including wage garnishments, lawsuits, and the seizure of assets.

How to Avoid Chapter 7 Denial

• Hire a bankruptcy attorney to guide you through the filing process.

• Be honest and transparent about all your assets and debts.

• Comply with court requirements, including documentation and credit counseling.

• Follow your attorney’s advice and respond promptly to trustee requests.

Work With a New York Bankruptcy Attorney Who Gets It Right

At Kamini Fox, PLLC, we help individuals across New York navigate Chapter 7 bankruptcy with clarity and confidence. We ensure your petition is accurate, complete, and compliant, so you get the fresh start you deserve.

Ready to File? Let’s Talk.

Contact Kamini Fox Law today for a confidential consultation and take the first step toward financial relief.