Bankruptcy is a costly process, and it tends to involve people who aren't financially prepared for dealing with legal mistakes. Add on the inherent pain of potentially refilling a case, and no one wants to have a court reject their petition. To that end, a bankruptcy attorney will tell you to be aware before you file of these four reasons for rejections so you can avoid them.
Ineligible
A court may determine that you're ineligible for one or both of the two kinds of major bankruptcies. People and businesses that file for asset liquidation through Chapter 7, for example, have to meet certain standards. For lots of folks, these are easy to meet because the court usually presumes anyone with less than their state's median income is eligible. If you make it above that level, you'll have to pass a means test. The court may reject a petition if the judge determines that a person could either afford to pay their creditors outright or at least restructure under Chapter 13.
Likewise, the court can reject restructuring plans under Chapters 13 or 11. In many of these cases, the court will consider a different plan, particularly if the creditors propose something reasonable. However, there are cases where the court tells people or companies that restructuring is off the table because it believes they can pay.
You want to be sure that you stand a good chance of approval before you file. Meet with a bankruptcy lawyer to learn what the rules are in your state and how judges tend to see edge cases.
Recency
Courts also strongly discourage petitioners from filing for bankruptcy frequently. How often you can file a second petition depends on both the type you last filed and which version you're filing now. Once more, as a lawyer who practices bankruptcy law to review your case and tell you which rules apply to your situation. Also, there are extreme scenarios where a judge might accept an early petition if a filer's finances are wrecked.
Lack of Credit Counseling
American bankruptcy law requires filers to complete credit counseling before even submitting a petition. If you can't afford credit counseling, you can ask the court about low-cost options. Failing to complete credit counseling and send in the correct paperwork to prove it is grounds for a bankruptcy rejection.
Procedural Mistakes
Filing for the wrong type of bankruptcy or sending the wrong forms is a notable mistake. Hire a bankruptcy attorney so they can advise you about assembling and sending the paperwork.
For more information, contact a bankruptcy lawyer near you.