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When will a court deny a bankruptcy discharge?

People suffering from difficult amounts of debt file for bankruptcy in their efforts to discharge and dissolve that debt for good. The liberating feeling of wiping your debt slate clean is one of the best feelings anyone can have upon the completion of the bankruptcy process. However, there are some bankruptcy cases in which a court will deny the discharge, and the bankruptcy filer will never get to dissolve the debt that plagues him or her.

One situation that could lead to a denial of discharge is if the debtor commits acts deemed incompatible with the notion of an honest but unfortunate debtor. Before making such a determination, the bankruptcy court will hold a trial and give the debtor the chance to defend him- or herself from such allegations.

Here are a few acts that might cause a court to issue a denial of discharge:

  • Concealing, transferring or destroying financial records or financial assets
  • Issuing false oaths pertaining to the bankruptcy
  • Failing to maintain records and/or bookkeeping that can be used to ascertain the debtor's financial situation.
  • Other issues that render the debtor to be untrustworthy

Unfortunately, when a denial of discharge occurs, it is not merely the end of the debtor's hope for a discharge in the case. In fact, the bankruptcy will continue and the court will finish the liquidation of his or her assets. However, the debtor will never benefit from the discharge. In this way, the court penalizes the debtor for his or her lack of honesty. Honest debtors, who manage the bankruptcy process appropriately and disclose their financial situations completely, do not have to fear the potential for a denial of discharge.

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