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Bad Faith Bankruptcy Filing

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In order to have debts discharged in bankruptcy, it is required that the Debtor file in good faith. Alternatively, filing in bad faith means that the debtor is applying with the intention to abuse the bankruptcy system and evade his financial obligations. Our West Palm Beach bankruptcy attorneys take legal processes very seriously and maintain high standards of moral and ethical practices. To learn more about what is considered a bad faith filing, please read the following.

Filing for Bankruptcy in Bad Faith

Any form of misrepresentation such as purposely withholding information on the application, or filing for the sole intention of delaying creditors is considered bad faith bankruptcy filing. Usually there are some clear indications of bad faith filing. Here are the most common factors the courts take into consideration when examining the intent of pursuing bankruptcy.

  1. Number of prior bankruptcy discharges filed and any resulting dismissals
  2. Missing information on the application/petition
  3. Obvious signs that the bankruptcy defendant is attempting to delay lenders
  4. Not completing post-bankruptcy compliances
  5. Evidence that high-end items were financed before an increase in expenses
  6. Comprehensive unethical conduct

If there is a suspicion that a debtor is filing for bankruptcy in bad faith with the intention of abusing the court system, the filing will likely be denied and other serious repercussions may follow.

Consequences After Filing in Bad Faith

The severity of unethical conduct along with the amount of non-exempt assets the debtor owns will determine the consequences to filing in bad faith. Some of the outcomes include: the dismissal of the case, permanently losing the right to have debts expunged at the time of filing, and loss of non-exempt assets. Most likely, when a debtor is found to have filed for bankruptcy with the sole intention of delaying creditors, the defendant will lose all non-exempt assets—even if he filed for Chapter 13 bankruptcy, which normally allows the conservation of all property even if non-exempt. The court also holds the power to convert a Chapter 13 bankruptcy case to Chapter 7, automatically giving trustees the ability to sell all assets to cover debts.

Talk To A Lawyer

Abiding by the bankruptcy court’s rules and regulations is mandatory and any unethical conduct will have serious consequences. It is important to follow the rules and guidelines of bankruptcy carefully, as there is the possibility of the court misinterpreting a filing in bad faith, in which case guidance from one of our West Palm Beach bankruptcy lawyers should be sought immediately. To learn more, please schedule a consultation at Kelley Kaplan & Eller today.

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