Honesty Leads to the Successful Discharge of Your Debts

Bankruptcy is all about giving you an honest fresh start.

Here’s how the U.S. Supreme Court has put it:

This Court has certainly acknowledged that a central purpose of the [Bankruptcy] Code is to provide a procedure by which certain insolvent debtors can reorder their affairs, make peace with their creditors, and enjoy “a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt.”

But look at the Court’s very next sentence:

But in the same breath that we have invoked this “fresh start” policy, we have been careful to explain that [bankruptcy law] limits the opportunity for a completely unencumbered new beginning to the “honest but unfortunate debtor.”
(From Grogan v. Garner , a 1991 opinion, partly quoting from a 1934 opinion.)

So what is the “honest debtor” that the Court was referring to there? There are two kinds of honesty that count in the bankruptcy process: 1) honesty with your creditors AT THE TIME YOU GOT your debts and 2) honesty with the bankruptcy court.

MOST people filing for bankruptcy do NOT have problems on either end. They didn’t lie to get their credit, and they provide their attorney accurate information for their bankruptcy paperwork. So do not worry about this more than you need to. This blog should help you know whether you can put your mind to rest.

Honesty with Your Creditors

When you file a regular Chapter 7 bankruptcy case, most debts that you expect to discharge (legally write off) do in fact become discharged. Your creditors do not challenge the discharge and the court orders the debts discharged, so you will never have to pay them.

Each of your creditors CAN challenge the discharge of its particular debt, but only under very specific, narrow grounds requiring your dishonesty or some similar bad behavior WHEN you incurred the debt. These challenges are relatively rare. They involve, for example, accusations of lying on a credit application, using credit when you had no intention of paying it off, getting credit by fraud of any sort, theft, embezzlement and causing intentional bodily harm or property damage.

Because by definition these actions would have happened at the time you got the credit, presumably long before considering bankruptcy, what’s most important now when you are considering bankruptcy is to be honest with someone other than your creditors: your bankruptcy attorney. To get good advice about how best to deal with your overall financial situation, it’s crucial — for your own benefit — that you be candid and thorough with your attorney. He or she can only give you good advice if you give him or her your whole story, sometimes especially things you’re most squeamish about saying. Most of the time, you’ll get reassurance that what you were worrying about is less of a concern than you thought. And if not, then it is all the more important that you inform your attorney so that he or she can protect you as much as possible.

Honesty with the Bankruptcy Court

Your communication with the Bankruptcy Court in a Chapter 7 case is primarily by one means: your paperwork, mostly your bankruptcy petition and related documents that you sign under penalty of perjury. You also have a very short (usually five to 10-minute) meeting with your bankruptcy trustee, during which you are also put under oath. It should be obvious that you have to be honest with the system in both these forms of communication.

This is usually not very hard. Remember, as the Supreme Court has said, the point of bankruptcy is to give you “a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt.” Mostly you just need to cooperate with the process to get to this result.

The best way to get there is, again, to be candid and thorough with your attorney. The questions in the bankruptcy paperwork are often NOT perfectly clear, and you need to ask for clarification when they are not. If you are concerned about anything in your past or present financial life, err on the side of caution and tell your attorney. You’ll not only help your case proceed smoothly, but you’ll be relatively relaxed about it.

Contact an Experienced Rockwall Bankruptcy Lawyer

To schedule a free, confidential consultation with an experienced bankruptcy lawyer in Rockwall, Texas, please call me at 972-772-3083 or fill out this form and I will contact you to schedule an appointment. I do my best to answer all calls, but sometimes I am in court or with another client. Please leave a message if I do not answer the phone, and I will return your call as soon as possible.

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Call Rockwall bankruptcy lawyer Carrie Weir at 972-772-3083 or fill out the contact from below for a free, confidential consultation to discuss your options.

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