A discharge order discharges your obligation to pay a discharged debt, forever. If the court dismisses your case, your obligation to pay your creditors continues. The creditors will know your case is dismissed and that they are allowed to pursue collection. Dismissal is a harsh result. This result is opposite to your financial fresh start goals and opposite to our commitment to making this process as easy as possible for you.
The Court must find a reason to dismiss your case. You will have an opportunity to testify and present evidence to show you are eligible for a Chapter 7 discharge. Only the Court and Trustees bring motions to dismiss. Angry creditors will do their best to motivate the Trustee to look for evidence you are a bad faith filer.
The Court may dismiss your case if you have caused an unreasonable delay that is prejudicial to one or more of your creditors. The Court will also look to see if you are a good faith petition filer and the totality of your circumstances when you filed your case testify you are a good faith petition filer, an honest debtor in need of a discharge of debts. Multiple amendments signed under penalty of perjury beg the question, which time were you telling the truth? Know your accurate monthly budget and keep receipts and/or records.
Here is another example of how the Court can find bad faith. The land of Bankruptcy Rules differs from the land of Estate Law. The land of Bankruptcy Rules considers transfers of property to family members or friends within one year of filing your petition for no consideration bad faith. The rules for the land of Estate Law consider transfers to family members or friends normal course of business. Undoing Estate Law transfers before you enter the land of Bankruptcy Rules allows you to be a good faith filer.
The Court may dismiss your case if you fail to pay the required fees for your case; filing fees for example.
The Court may dismiss your case if you filed an incomplete petition on an emergency basis and fail to file the rest of the petition documents within 15 days. Bank Levies, Wage Garnishments and Foreclosures create deadlines and cause stress. Incomplete petition filings delay stress relief for two reasons, stress continues until the rest of your petition papers are filed in the 15 days window and during that time you are disclosing information to your attorney that if you had organized and prepared a little ahead, could eliminate problems. Such as transfers made to family and friends can be quickly undone before you entered the land of Bankruptcy Rules and are branded a bad faith filer and prevented from obtaining your fresh start.
The Court may dismiss your case if you fail the ‘means test’. This is the test that measures your disposable income by subtracting your expenses from your income. It would seem that you would know when you file your papers if you fail the means test. However, your expense and income amounts can be challenged and if you fail to prove the expense in the amount or the need you claimed, you may fail the means test.
You fail the means test if your monthly disposable income multiplied by 60 pays more than 25 percent to your unsecured non-priority creditors or $7,700; $12,800 and the result is that the court will not allow a chapter 7 discharge.
How do you fail/pass the means test? Start with your income, from all sources, including payments for your bills made by family or friends, and then deduct your allowed expenses. Do not include your spouse’s income if you are separated and living in different households.
The first tier of allowed expenses are the amounts under the IRS National Standards and Local Standards and your actual monthly expenses for the Other Necessary Expenses based on your family size, allowed amount information is available online at https://www.irs.gov/businesses/small-businesses-self-employed/national-standards-food-clothing-and-other-items . Bankruptcy allows $700 for each additional person over 4 in the household.
The second tier of allowed expenses are expenses for reasonably necessary health insurance, disability insurance, and health savings account expenses; reasonable expenses identified to stay safe under §302 of the Family Violence Prevention & Services Act; up to 5 percent additional allowance for food and clothing if you can prove the amount is reasonable and necessary; actual expenses paid for the care and support of an elderly, chronically ill, or disabled household member or member of your immediate family; contributions to an ABLE program account for a child, stepchild, grandchild, or step grandchild; additional allowance for actual reasonable and necessary expenses for housing utilities; up to $1,925 for each dependent child under 18 to attend private or public elementary or secondary school when you provide supporting documents and demonstrate that the expense is reasonable and necessary.
The third tier of allowed expenses is the amount to pay off your secured debt on personal property you are keeping, and the total amount to pay off your allowed priority debt, such as taxes, child support, criminal restitution judgment, in full, divided by 60 for the monthly allowable expense amount. Secured real property payments are the monthly amounts plus the amount to cure any default divided by 60 for the monthly allowable expense amount.
If you are a disabled veteran and you were on active duty or performing a homeland defense activity for 90 days or more and the debt is incurred while you are on active duty or within 540 days after active duty, the means test does not apply to you.
The Court may dismiss your case if a victim of a violent or drug trafficking crime you committed asks. The court will set a hearing and you may oppose the motion.
The Court may not dismiss your case if you can show that the bankruptcy case is necessary to satisfy a claim for a domestic support obligation.