In this article, we explain how to avoid filing for bankruptcy in bad faith and answer the questions:
Bankruptcy is meant as an option for those in debt to get back on their feet and start over with a clean, or at least much more organized, financial slate. However, there are many people in the world that will try to exploit a system for their own personal gain, and bankruptcy is not immune to exploitation. Thankfully, many checks and balances exist to discover those filing for bankruptcy in bad faith, and trying to game the bankruptcy system comes with severe consequences.
Filing for bankruptcy in bad faith can be an honest mistake, but in most cases, it’s because an individual or company is trying to avoid a portion of the bankruptcy process, prolong the time they have to pay a debt or to avoid the consequences of getting into debt in the first place. There are many different avenues to filing for bankruptcy in bad faith, but working with an experienced bankruptcy attorney can help you avoid any potential issues and keep your bankruptcy case from being unexpectedly denied by the court.
Whether it was done deliberately or by mistake the majority of bad faith filings are the result of the petitioner filing for bankruptcy to delay creditors with no intention of following through on the bankruptcy. Some common examples of filing for bankruptcy in bad faith include:
The examples of bad faith bankruptcy filings are numerous as any mistake in paperwork, failure to report an asset or debt, or any other omission may be viewed as deliberate and considered bad faith.
Bankruptcy filings have a lot of moving parts and the court will look at all of them when determining the validity and lawfulness of each filing. A number of factors can indicate to a judge that the bankruptcy filer is attempting to manipulate the system and gain an advantage not intended under the bankruptcy process. The ability of the court to comb through every piece of information, account, etc, often at the discomfort of the bankruptcy filer, is referred to as the “totality of circumstances.” Some common factors the court will consider when attempting to rule out a bad faith filer include:
The easiest way to avoid being charged with filing a bankruptcy in bad faith and having your bankruptcy discharge unexpectedly denied, or worse, being charged with bankruptcy fraud, is to hire an experienced bankruptcy attorney. If you have questions about bankruptcy give us a call at 630-324-6666.
O'Flaherty Law is happy to meet with you by phone or at our office locations in: