How you’ve handled money in the past plays no part in your eligibility for bankruptcy relief. None, nada, not a bit.
Yet this issue generates all to much anxiety on the part of those considering bankruptcy. People worry that taking a vacation, buying concert tickets, signing kids up for activities, or replacing worn out appliances will shut them out of bankruptcy.
Of course, if you’ve engaged in a deliberate pattern to exploit and deceive your creditors, it’s a different story.
Bankruptcy debtors arrive in court with all kinds of financial history and they leave with a discharge of their dischargeable debts. That includes
- the over-optimistic
- the self-indulgent
- the financially unprepared
- the risk-taker
- the unfortunate
- the victim
- the sick
- the gambler
- the entrepreneur
- those just squeezed by today’s economy
Requirements to get discharge
The one characteristic that bankruptcy requires is honesty, full disclosure of your assets, debts and financial history.
There is nothing in bankruptcy law that conditions your discharge on having been wise with your money, nor meeting a test that asks if you are “worthy” of debt relief.
Bankruptcy trustees review your bank records, not to judge how you’ve spent your money, but to see if those records are generally consistent with your bankruptcy schedules.
Who doesn’t get a bankruptcy discharge
Two kinds of things can stand between a bankruptcy filer and a discharge. One group are procedural barriers that result in the dismissal of a case. The second is dishonest behavior that results in the denial of discharge. Dismissal has far different consequences than denial.
Procedural barriers include a recent bankruptcy, failure to get pre filing credit counseling or post filing debtor education, failing the means test, neglecting to file all of the necessary documents, or failure to appear and testify at the first meeting of creditors.
Dishonest behavior with respect to the court or your creditors as a whole may disqualifying one from a discharge. See the entire list of grounds for denial of discharge. Denial of discharge requires an adversary proceeding with a trial before a judge. Such actions are very rare.
Bottom line
Eligible bankruptcy filers who file thorough bankruptcy schedules and jump through the procedural hoops are almost assured of getting a fresh start.
