What Disqualifies You from Filing Bankruptcies?

Bankruptcy, while scary, can be a boon to those who find themselves in a dire financial situation. It offers the ability for one to escape debt and move on with their life. Unfortunately, the path of bankruptcy is not open to everyone. There are certain circumstances which may disqualify a person from filing for bankruptcy. 

Recent Bankruptcy Dismissal

When a bankruptcy case is dismissed, it means that the court has denied a person’s petition for bankruptcy. If this happens, it disqualifies that person from filing for bankruptcy again for a certain period of time. The exact length of time the person will have to wait before being eligible to file again will vary depending on the exact type of bankruptcy case that was dismissed. If a Chapter 7 Bankruptcy was dismissed, the person will have to wait at least 180 days before filing for bankruptcy again. If it was a Chapter 13 Bankruptcy that was dismissed, the waiting period will be much longer, usually 2 years. Until these waiting periods are up, a person will be disqualified from once again filing for bankruptcy.  

Fraud

Bankruptcy is intended as a tool for honest debtors to regain control of their lives. The court system does not look kindly on anyone who introduces fraud into this system. If you are found to have committed fraud on your bankruptcy petition, your petition will be denied. You may even face criminal charges. Additionally, you may be disqualified for applying for bankruptcy again in the future. Bankruptcy fraud includes lying about assets, income, or debts on a bankruptcy petition, transferring or hiding assets to avoid having them included in the bankruptcy estate, or providing false information to creditors or the court.

It can not be overstated how serious bankruptcy fraud is. Doing so will not help your financial situation. More likely, it will make your situation even worse than it was prior to declaring bankruptcy. Since your petition will be denied, you will still have your debt, but with the addition of criminal charges.

High Income or Assets

Chapter 7 bankruptcy requires the passing of the means test. The means test is intended to prevent people from taking advantage of the bankruptcy system by filing for chapter 7 bankruptcy when they could actually afford to repay some or all of their debts through a chapter 13 bankruptcy plan.  People with a high income or valuable assets may fail this test. A failure means that the court believes you have the ability to repay your debts. If you fail the means test, you will be disqualified from filing for Chapter 7 bankruptcy. To be clear, high income or assets will only disqualify you from Chapter 7 bankruptcy, you will still be able to go through Chapter 13 bankruptcy. 

Bankruptcy Discharge

A bankruptcy discharge is a formal court order in a bankruptcy case that officially releases a debtor from personal liability for most of their debts. This means that the individual is no longer legally obligated to repay those debts, and creditors are prohibited from attempting to collect on them. A discharge can be seen as the end of the bankruptcy process. For Chapter 7 bankruptcy, It will occur after assets are sold and creditors are paid with the proceeds. For Chapter 13 bankruptcy, it occurs once the repayment plan is completed or a hardship discharge is granted. 

After a bankruptcy discharge, an individual is disqualified from filing bankruptcy again for a certain time period. If you had a Chapter 7 discharge, you must wait 8 years before filing again. If you had a Chapter 13 bankruptcy, you will only need to wait 2 years before filing again. 

Lack of Information

When filing for bankruptcy, the court wants a complete picture of your financial situation. This involves you providing them with a lot of information, including: 

• Personal Info: Your name, address, previous names, children’s ages, employers’ names and addresses, and information about your spouse.

• Income: Sources, amounts, and frequency of your income, including pay stubs, statements from employers, tax returns, and details of any other income sources like government benefits or rental properties. If self-employed, you’ll need profit and loss statements.

• Expenses: An extremely detailed list of your monthly expenses. This includes food, clothing, shelter, utilities, taxes, transportation, and medical costs.

• Assets: A complete list of all property you own and its value. This includes real estate, vehicles, personal property, and financial assets. 

• Debts: A list of all creditors, including their names, addresses, account numbers, and the amount owed on each debt, whether secured or unsecured.
• Financial Transactions: Details of certain recent financial transactions, such as property or money given away, debts paid off, and bank accounts closed.

Failure to provide any of the above will result in you being disqualified from applying for bankruptcy. For this reason, it is vital that you double check that you have provided all required information before filing your petition. 

Lack of Cooperation with the Bankruptcy Court

As mentioned, bankruptcy is a tool designed to help you. It is the court doing you a favor. For this reason, a lack of cooperation is not tolerated. Failure to comply with any court order, such as not providing necessary documentation or not attending hearings, will disqualify you from bankruptcy. 

Failure to Complete Credit Counseling

Under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, you must complete pre-bankruptcy credit counseling from an approved agency within 180 days before you file for bankruptcy. Failure to do so will disqualify you from filing for bankruptcy until the counseling is completed. This counseling is intended to help people make better financial decisions after bankruptcy.