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4 Reasons your Chapter 7 business bankruptcy case might be rejected

On Behalf of | Oct 5, 2022 | Chapter 7 |

Chapter 7 bankruptcy is a way for many businesses to get a “fresh start,” but your plan can be dismissed by the court if the reason behind your filing doesn’t meet the standards set forth by the courts. It’s important to know what can cause your chapter 7 bankruptcy case to be rejected or dismissed so you can work to prevent this from happening. Read on to learn more about what you can do to stay compliant with the courts and avoid any complications.

1. Substantial abuse

A bankruptcy court can dismiss your case if you have committed substantial abuse of chapter 7 bankruptcy. Substantial abuse is defined as having repeated filings for relief under chapter 7 or other chapters or having made a fraudulent conveyance. It also includes any conduct that is calculated to improperly interfere with the administration of the estate and causes an undue delay in the administration of your bankruptcy estate’s affairs. It could also include failing to give notice of any claim you might have against certain property that was going to be sold at an auction pursuant to a court order and not giving notice within 30 days before the date set for such sale (11 USC § 727(b)(2)(A)).

2. Failure to provide the necessary documents

One of the most common reasons for rejection is not providing the necessary documents on time. Often, these documents are due months after you file and it can feel like a lot to do at once. That said, they’re important for your case and filing without them will likely result in a denial of your petition. There are several types of documents that must be filed in order to proceed with your bankruptcy and failure to provide one or more of these items may result in dismissal.

3. Being convicted of (or charged with) certain crimes

If you have been convicted of a violent crime or drug trafficking, your chapter 7 bankruptcy case may be dismissed. There are also other types of crimes that can cause it to be thrown out. These cases don’t necessarily need a conviction in order for them to be considered; a plea of “no contest” or accepting a plea deal are enough to make you ineligible. 

4. Failing to pay domestic support obligations

One of the reasons for your bankruptcy to be dismissed is failing to pay child or spousal support. If you are in arrears on your court-ordered payments, you may have to go back and rectify this issue before proceeding with the bankruptcy filings. Failure to do so will result in a dismissal of your bankruptcy petitions. Therefore, it is in your best interest to take care of this as soon as possible.