You could be disqualified from filing bankruptcy if:
- The court dismissed your bankruptcy in the past 180 days
- You committed fraud
- You received a bankruptcy discharge in the past
If you need a fresh financial start, bankruptcy might be the answer for you. However, not everyone is entitled to these protections. Some people simply do not qualify to file for bankruptcy. Others might be barred from filing a bankruptcy case in general.
You might also have the right to file bankruptcy, only to find some of your debt cannot be discharged. This outcome can be frustrating, especially if it comes as a surprise to you at the end of the process. An experienced bankruptcy lawyer from our firm could help you understand what might disqualify you from filing for bankruptcy.
Qualifying for Bankruptcy
Before you can secure the protection of the U.S. Bankruptcy Code, you must qualify for one of the types of bankruptcy. There are several types of bankruptcy, with most individuals pursuing protection under either Chapter 7 or Chapter 13. These options are very different, as are their qualifications.
Qualifications for Chapter 7 Bankruptcy
Chapter 7 bankruptcy—commonly known as liquidation bankruptcy—has stricter financial limits compared to Chapter 13 bankruptcy. To qualify for Chapter 7, you must meet something known as the “means test.”
The means test involves a calculation of your assets and income, taken together with your debts and living expenses. To qualify for Chapter 7 Bankruptcy, your results on this test must fall under a certain level. Too much income will disqualify you from pursuing Chapter 7 bankruptcy.
Qualifications for Chapter 13 Bankruptcy
Chapter 13 bankruptcy has its own requirements, but a means test is not one of them. This type of bankruptcy is designed to allow a person with an income to make monthly payments towards their obligations, to eventually discharge some of them.
To qualify for Chapter 13, you must have up-to-date tax filings. You must also be able to show you have enough income to pay a monthly payment to the bankruptcy trustee.
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Some Factors Can Disqualify You From Bankruptcy Protections
Some factors can disqualify you from filing for bankruptcy outside of the basic requirements of Chapter 7 or 13. These include:
Recently Dismissed Bankruptcy Case
It is not unusual for the court to dismiss a bankruptcy. Having your bankruptcy case dismissed is not ideal, but it also does not necessarily prevent you from seeking protections from the bankruptcy code in the future.
That said, there is a time limit on the amount of time you have to wait to file again. According to the United States Courts, you cannot file for any type of bankruptcy protection within 180 days of having a previous bankruptcy case dismissed by the courts, if the dismissal occurred under certain circumstances.
A court might disqualify you from the bankruptcy process if they believe you attempted to defraud your creditors. This also applies to situations where debtors attempt to hide their assets. Fraud investigations generally start with the bankruptcy trustee, although in some cases creditors might petition the court to act.
Fraud can take different forms in bankruptcy court. Some of the most common allegations of fraud involve the following behavior:
- Selling assets for a fraction of their true value before filing for bankruptcy
- Lying about or misrepresenting assets or debts on the bankruptcy petition
- Concealing assets
- Incurring avoidable debts for luxury items before filing
There is another time limit to consider, and this one has to do with how long it has been since your last bankruptcy discharge. For example, you cannot receive a Chapter 7 bankruptcy discharge if you have received a previous Chapter 7 discharge in the last eight years. Likewise, you cannot receive a Chapter 7 discharge if you received a Chapter 13 discharge in the previous six years. There are also similar limitations if someone is considering a chapter 13 filing but has previously had a bankruptcy discharge. An experienced bankruptcy attorney can guide you through these timing considerations.
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What Debts Cannot Be Discharged in Bankruptcy?
It is important to remember that certain types of debts cannot be discharged through bankruptcy, even when you qualify for protection under the bankruptcy code. Understanding which debts cannot be discharged is as important as knowing whether you are disqualified from filing for bankruptcy. At Farmer & Morris Law, PLLC, we can advise you on both issues.
Student Loan Debt
Contrary to popular belief, student loan debt is typically not discharged in bankruptcy.The circumstances allowing for discharging student loans through bankruptcy are fairly limited, although recent legal developments have increased the availability of student loan discharge. Our firm could advise you if discharge through bankruptcy is an option for your student loan debt.
To have your student loan debt discharged in bankruptcy, you must show that you are facing “undue hardship.” In other words, you must be able to show that being forced to pay back these loans is causing severe financial strain on you and your loved ones. If a bankruptcy judge agrees, they can discharge your student loan debts. Otherwise, these debts survive discharge.
Alimony and Child Support
Unlike student loan debt—which can be discharged under limited circumstances—there is no avenue for discharging debts related to alimony and child support. While holding this type of debt will not prevent you from obtaining a discharge, it will remain in place after your bankruptcy concludes.
If you owe taxes to the government, it is likely it will not be discharged in bankruptcy. This includes income tax obligations and property taxes. Older personal income taxes that meet certain criteria may be dischargeable.
Contact an Attorney About Your Bankruptcy Case
You should never assume that you do not qualify for the protection of U.S. bankruptcy laws. These rules are full of exceptions that are not always obvious to first-time bankruptcy filers.
At Farmer & Morris Law, PLLC, we know you could benefit from a fresh financial start. Our attorneys have spent years navigating the bankruptcy system, and we are ready to put that experience to work for you. Contact us today to discuss what disqualifies you from filing for bankruptcy.