Posted on: 4 September 2019
Being rejected for a Chapter 7 bankruptcy isn't the end of the world. In fact, it could be the first step in getting your finances sorted. Rather than just an outright rejection, your bankruptcy lawyer will be able to help you find other solutions. Here's what you need to know.
Why Would Your Chapter 7 Bankruptcy Be Rejected?
A bankruptcy can be rejected for a number of reasons, such as incomplete paperwork. But most commonly, a bankruptcy is rejected because you either make too much money or owe too little. Bankruptcy only goes through if you can't realistically pay off your debts without undue hardship. If it's easy for you to pay off your debts, then you aren't going to qualify for a Chapter 7 bankruptcy.
What Happens After Being Rejected?
If it's just a documentation or a paperwork issue, then you can file for bankruptcy again. But if you have too little debt or too much income, a Chapter 13 bankruptcy will usually be advised. A Chapter 13 bankruptcy will restructure your debts so you can pay them off within three to five years, making a payment plan for you, and reducing the amount of interest that you need to pay.
Should You Accept a Chapter 13 Bankruptcy?
In most cases, if you've been rejected for a Chapter 7 bankruptcy, a Chapter 13 bankruptcy is your best bet. It will vastly reduce the amount of money that you need to pay. Though you will need to make your monthly payments, you'll be debt free once those payments are completed. A Chapter 13 bankruptcy will also steadily improve your credit rating and it won't stay on your credit report as long as a Chapter 7 bankruptcy.
Are There Other Alternatives to a Bankruptcy?
If you can't qualify for a Chapter 7 or Chapter 13 bankruptcy, you can consider consolidating your loans, or trying to settle your debt. Usually a bankruptcy isn't going to be outright denied unless you can reasonably pay the money back, so you may need to work with a financial adviser to create a plan for getting out of debt. You can also try to apply for bankruptcy again with updated information.
If you're rejected for Chapter 7 bankruptcy, don't panic. It's very likely you'll still be able to qualify for Chapter 13. In many aspects, Chapter 13 bankruptcy is actually better: it lets you recover faster, and you still get to pay off your debts for a fraction of what is owed.Share