The goal of most Chapter 7 cases is to get in and get out—file the petition, go to a hearing with your attorney a month later, and two months after the hearing, your debts get written off. Mission accomplished, end of story. And usually that’s how it goes. What are some reasons that a Chapter 7 case doesn’t go that way?

Four main kinds of problems can happen:

Income

Under the “means test,” if you made or received too much money in the 6 full calendar months before your Chapter 7 case is filed, you can be disqualified from Chapter 7. As a result, you can be forced into a 3-to-5 year Chapter 13 case, or have your case be dismissed altogether. These results can be avoided by careful timing of your case filing, or by making changes to your income beforehand, or by a proactive filing under Chapter 13.

Assets

In Chapter 7, if you have an asset that is not “exempt” (protected), the Chapter 7 trustee will be entitled to take and sell that asset, and pay the proceeds to your creditors. You might be happy to surrender a particular asset you don’t need in return for the discharge of your debts, in particular if the trustee is going use the proceeds in part to pay a debt that you want paid, such as a child support arrearage or an income tax obligation. But you may not want to surrender that asset, either because you think it is worth less than the trustee thinks or because you believe it fits within an exemption. Or you may simply want to pay off the trustee for the privilege of keeping that asset. In all these “asset” scenarios, there are complications not present in an undisputed “no asset” case.

Creditor Challenges to Discharge of a Debt

Creditors have the limited right to raise objections to the discharge of their individual debts, on grounds such as fraud, misrepresentation, theft, intentional injury to person or property, and similar bad acts. In most circumstances, the creditor must raise such objections within about three months of the filing of your Chapter 7 case. So once that deadline passes you no longer need to worry about this, as long as that creditor got appropriate notice of your case.

Trustee Challenges to Discharge of Any Debts

If you do not disclose all your assets or fail to answer other questions accurately, either in writing or orally at the hearing with the trustee, or if you fail to cooperate with the trustee’s investigation of your financial circumstances, you could lose the ability to discharge any of your debts. The bankruptcy system relies on the honesty and accuracy of debtors. So the system is quite harsh toward those who abuse the system by trying to hide things.

To repeat: most of the time, Chapter 7s are straightforward. That’s especially true if you have been completely honest and thorough with your attorney during your meetings and through the information and documents you’ve provided. In Chapter 7 cases that I do for my clients, my job is to have those cases run smoothly. I do that by carefully reviewing my clients’ circumstances to make sure that there is nothing troublesome, and if there is, to address it in advance in the best way possible. That way we will have a smooth case, or at least my clients will know in advance the risks involved. So, be honest and thorough with your attorney, to increase the odds of having a simple Chapter 7 case.

Discuss your financial situation with bankruptcy attorney Jennifer N. Weil by scheduling a phone appointment at (201) 676-0722 or by emailing weilattorney@gmail.com.