Who Can File for Bankruptcy Protection?

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In short, determining who can file bankruptcy is best resolved by outlining who can’t file bankruptcy. Unless otherwise explicitly precluded from filing bankruptcy (based on items noted below), any citizen can file bankruptcy. It is important to note that the most common forms of bankruptcy, Chapter 13 and Chapter 7, do have different eligibility requirements, with Chapter 7 being reserved for debtors unable to resolve their debt issues via Chapter 13.

Any petition to the courts will require a debtor to file a lengthy set of documents (known as schedules) outlining a number of things, including income, assets, debts, expenses, and a slew of other financial questions. These responses effectively will dictate the eligibility of a given debtor to file bankruptcy. As a relevant side note, any attempt to defraud the bankruptcy process will also automatically, at the very least, result in dismissal of the bankruptcy petition by the courts as well.

Causes of Ineligibility to File Bankruptcy

  • Should a debtor earn too much income, a Chapter 7 petition may be automatically forced into Chapter 13 bankruptcy, per the courts order. The income requirements, as well as debt thresholds, were explicitly outlined in the BAPCPA of 2005.
  • If current monthly income of household is less than current median monthly income of household of the same size in your state of residence, debtor will be eligible to file Chapter 7. Current monthly income is defined as the average monthly income of household over past six months.
  • If income higher than median income in state, debtor must first pass means test to obtain protection under Chapter 7, otherwise case bumped to Chapter 13.
  • Debtor must undergo means test, which was implemented to prevent abuse of bankruptcy system (specifically discharge in Chapter 7). Process seeks to determine on case-specific basis whether a debtor has sufficient income, in light of all outstanding expenses and debt-related payments, to repay debts owed over five (5) year time span. In short, can a debtor alleviate his or her debt problems under the Chapter 13 process as effectively as under Chapter 7.
  • Debtors cannot obtain discharge in Chapter 7, if the debtor has filed and obtain discharge in Chapter 7 within the previous eight (8) years. Debtors cannot file for Chapter 13 protection if debtor has filed and undergone Chapter 13 within past six (6) years.
  • Debtors cannot file initial petition again, within 180 days, if prior petition rejected due to violating court order, abuse or fraud, or dismissal was self-requested.
  • Debtors can have their bankruptcy case dismissed (Chapter 13 or Chapter 7), if they attempt to defraud the trustee, creditors, or the courts at any point, including engaging in fraudulent transfers, among other many other items.

Getting Legal Help with Filing for Bankruptcy

Should a debtor not fall under any of the aforementioned areas, he or she is likely eligible to file for bankruptcy. However, the next step in the process will be determining whether to petition to file for Chapter 13 or Chapter 7 bankruptcy, and in turn, how each chapter may influence current debts, assets, or other items. For more information and insight, consult with a bankruptcy lawyer in your state of residence to determine your eligibility to file bankruptcy, including whether you are eligible to file either Chapter 7 or Chapter 13 bankruptcy and how each chapter may affect your current debt situation.