Lasting Effect of Denial of Bankruptcy Discharge

Here is an example of the importance of being truthful on your bankruptcy petition if you file bankruptcy. A man consulted with us about filing Chapter 7 bankruptcy in Florida after he had previously filed in another state five years ago. In the previous filing, the court denied the client his Chapter 7 bankruptcy discharge because he had fraudulently misrepresented assets on this bankruptcy schedules.

I first explained that the denial of discharge was not a dismissal of his bankruptcy case. The court’s denial of a discharge for wrongdoing does not halt the bankruptcy proceeding. The bankruptcy trustee administers any non-exempt assets and then distributes them to creditors. None of the unsecured debt is wiped out (discharge) because the Chapter 7 bankruptcy discharge has been taken away because of the debtor’s misconduct.

Generally, a Chapter 7 debtor may file another bankruptcy in eight years. But, the bankruptcy code provides that a Chapter 7 bankruptcy may not discharge any unsecured debt that was listed, or could have been listed, in a prior Chapter 7 bankruptcy case in which the bankruptcy discharge was denied for any reason. The ban is permanent.

This client would never be able to file Chapter 7 bankruptcy to list any debt that was listed on his schedule in the prior bankruptcy. His only bankruptcy option is filing a Chapter 13 bankruptcy in which he pays back a portion of the debts over a period of time.

About the Author

Jon Alper is nationally recognized as an expert in asset protection planning. He has over 25 years of experience in helping people protect their assets from creditors. Read more.

Jon Alper

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