New Jersey Bankruptcy Blog

Prior Chapter 7 Discharge
A debtor is not entitled to a chapter 7 discharge, if he has received a chapter 7 discharge of a prior chapter 7 case that was filed less than 8 years before the filing of the subsequent case. The time is measured from the date on which the prior case was filed with court to the date of the filing of the subsequent case, and not the discharge date of the prior case.
A debtor is not entitled to a chapter 7 discharge if the debtor received a chapter 13 discharge within 6 years, from the filing of the prior chapter 13 case.  In other words, to obtain a discharge, the subsequent chapter 7 must have been filed 6 years after the filing of the prior chapter 13 case. However, the exception to the six year time period rule is applicable if the following criteria was met in the prior chapter 13 case:
1. the debtor paid 100% of the allowed unsecured claims; or
2. the debtor paid 70% of the allowed unsecured claims, the debtor’s plan was proposed in good faith, and the debtor applied his best effort to pay the unsecured debt.
Robert Manchel, a NJ bankruptcy attorney, can be contacted at 1 (866) 503-5655 to discuss your options for bankruptcy protection.

Some of our previous posts in the series stated certain acts or behavior of a debtor that may cause a person to file an objection to a chapter 7 discharge, which could possibly result in the denial of a discharge.  A general description of these acts or behavior include the debtor’s failure to cooperate with the bankruptcy process and the debtor’s fraudulent intent regarding the bankruptcy petition information, such as assets, income, etc.
The debtor may also be barred from a chapter 7 discharge, if they committed any of the above referenced wrongful acts, during their case, or during the one year prior to the filing of their case, in connection with a separate bankruptcy case, that involves an insider’s bankruptcy case. An insider is a person, corporation, or entity, that has a special relationship with the debtor, such as the following: relative; partner; partnerships and corporations, of which the debtor is the director, officer or person controlling the business. For example, a father is the insider of his son, the debtor, who filed for bankruptcy. If a corporation filed for bankruptcy, the director of the corporation would be considered an insider.
Although this section may be applied to a personal consumer debtor, the main reason for the section is to prevent an individual to benefit from his wrongful acts related to a separate bankruptcy case, involving his bankrupt business.  For example, if the director of bankrupt corporation commits fraud, in connection with that bankruptcy case, he may not file subsequent bankruptcy case and obtain a chapter 7 discharge.
Robert Manchel, a bankruptcy attorney in New Jersey, can be contacted at 1 (866) 503-5655 to discuss your situation and how filing for bankruptcy protection may benefit you personally.

A debtor may be denied a discharge if he refuses to comply with a direct order of the bankruptcy court.
Please note that it is very unusual for a debtor to be denied a discharge under this code section. Typically, to deny a debtor a discharge, the failure to comply with the court order, must include some kind of fallacious intent, together with an effect on the ability to administer the estate or obtain property of the estate.
Typically, a debtor will be denied a discharge, under this section, if he refuses to turnover bankruptcy estate property to the court, or disclose the whereabouts of certain property of the bankruptcy estate. In certain situations, a debtor may be required to turnover property that he believed would not be taken by the court or trustee. Or, there may be a situation when the debtor innocently used or sold certain property that he did not know is part of the bankruptcy estate. This most likely occurs, when the debtor is not properly counseled by his attorney.
It is possible that a debtor may be denied a discharge for failure to testify about a matter that is important to the case. However, in this situation, depending on the circumstances, the debtor may not be denied a discharge, if his refusal was due to his evocation of his privilege against self incrimination.
NJ bankruptcy Attorney Robert Manchel can be contacted at 1 (866) 503-5655.
 

The fifth reason for an objection to a chapter 7 discharge is the failure to explain the loss or the deficiency of an asset.
This objection is very similar to the prior objections relating to the debtor’s intentions and veracity. Typically, this objection concerns a debtor who previous owned valuable assets, included cash, which have either substantially dissipated in value, or  are no longer owned by the  debtor.  If a creditor established that the debtor owned certain assets, the debtor should provide a reasonable explanation as to the reduction in the value or the transfer of the asset.
Although the objecting party may include this as an additional ground for the denial of a discharge, typically the objecting party will not focus on this issue.  Also, in deciding such issues, the court is hesitant to withhold a discharge, based on the debtor’s poor judgment.
Attorney Robert Manchel, a New Jersey bankruptcy practitioner, may be contacted at 1 (866) 503-5655.

Any debtor who commits fraud, testifies falsely, withholds records, etc. will be denied a discharge. This includes the false information provided on the bankruptcy petition, as the information is sworn to under oath. However, typically a debtor will only be denied a discharge if the false oath relates to a material matter of the case and has an impact on the creditors and the bankruptcy estate. Also, typically, for the denial of a discharge, the falsity must be intentional and not based on carelessness or mistakes.
Typically, fraud committed in connection with a particular debt or creditor will result in the exception of that particular debt from discharge and not the entire bankruptcy case.  For example, an individual who is extended credit based on false information, at the time of the loan, will not be permitted to discharge that debt at the time of the bankruptcy filing.  Typically, such fraud will not result in the denial of the discharge of all debt included on the petition.
Also, the fraudulent act of one debtor does not necessarily effect the dischargeability of the joint debtor’s debt,  in a joint filed bankruptcy case. If one joint debtor failed to include an asset on the petition, in which the joint co-debtor was unaware of, the co-debtor’s right to a discharge will be unaffected.
You may contact Robert Manchel, a bankruptcy practitioner in NJ, at 1 (866) 503-5655.
 

Another reason for the denial of a chapter 7 discharge is the unjustified failure to keep books or records as to finances.
The bankruptcy code indicates that a debtor will be denied a discharge if he “concealed, destroyed, mutilated or falsified, or failed to keep or preserve any recorded information” regarding his finances, unless such act or failure was justified under the circumstances.
This objection is typically unsuccessful against a consumer debtor that is an employee, as the debtor’s financial picture may be established by copies of pay stubs, bills, credit reports, etc. Also, it is typically not unreasonable for an individual consumer to not keep detailed records of his finances. The courts understand that individuals will likely only keep copies of their  bills, receipts, canceled checks, etc. Although very unusual, the court may deny a consumer’s discharge if the consumer’s records are so deficient that the court or other parties cannot ascertain an accurate picture of the consumer’s financial affairs.
This objection typically relates to an individual who owns a small business. A small business owner should be able to provide sufficient records to the court that provides at least a close estimate of the amount of their businesses’ receipts and expenses. This may possibly be accomplished by Profit and Loss Statements. However, the trustee may request additional proofs such as work contracts and receipts for supplies.
Robert Manchel is a New Jersey Bankruptcy Attorney and can be contacted at 1 (866) 503-5655 to answer any of your questions regarding Chapter 7 Discharge or other bankruptcy related topics.