Many people who enter the bankruptcy system approach the subject as forbidden fruit or a scam to be gamed to best advantage. In truth, Bankruptcy is a system designed to give the honest but unfortunate debtor a fresh start in life. It is a very non-judgmental system when it comes to poor choices, bad planning and bad luck, but a very unforgiving system when it comes to intentional lying in all of its forms. Being sincere with the Bankruptcy system is a key to getting the forgiveness of debt so important to a fresh start.
There are two ways in which intentional dishonesty will tend to trip up a debtor and cause serious problems in a bankruptcy context. The first is in creating non-dischargeable obligations by lying, cheating, or stealing. It is also bad to cause damages maliciously, or profit from those who you owe fiduciary, trust type, duties. When you incur a debt through one of these means you may very well find that creditor, or injured party, bringing a complaint in Bankruptcy Court to have that particular debt survive the Bankruptcy process.
The second way that dishonesty will ruin a perfectly good bankruptcy is in lying to the court about your assets, liabilities, contracts, budget or other financial affairs. Bankruptcy courts are specifically authorized to deny a discharge to debtors who do not come clean in their filings with the court. Even worse, the Bankruptcy Court can actually retain a Chapter 7 case so that the trustee will still seize assets for your creditors even though you may not receive a discharge.
The law disfavors both of these sets of circumstances. The presumption is that the debtor should be discharged of all dischargeable debts. So, no one should be too anxious to just give in without a fight on these types of issues. Of course, the best policy is just to be honest. Most people who need bankruptcy did not incur debt with the purpose of defrauding their creditors. Most people just plain need help and the Bankruptcy Code is there to provide just that.