Who Can File For Chapter 7 Bankruptcy?

Many individuals who file for bankruptcy choose to file for Chapter 7 bankruptcy. However, you must meet several criteria to be eligible. Your income cannot be over a certain amount, and if it is, you must pass the "means test." In addition, the court will dismiss your case if you have filed a previous bankruptcy within a certain period of time, or if the court believes you are cheating your creditors.

The experienced bankruptcy attorneys at The Law Offices of George Castrataro, P.A., have helped hundreds of people file for bankruptcy. We can help you determine whether you qualify for Chapter 7 bankruptcy and get you started with the process.

Here are five common situations in which you would not be eligible to file for Chapter 7 bankruptcy.

1. You Have Enough Income to Repay Your Debts

Under old bankruptcy rules, a bankruptcy judge had the power to dismiss a Chapter 7 bankruptcy case if he or she thought the debtor had sufficient disposable income to fund a Chapter 13 repayment plan. There were no hard and fast rules dictating when a judge should dismiss a case on these grounds — it depended on the facts of the case and the attitude of the judge.

Under new bankruptcy laws, however, there are clear criteria that dictate who will be allowed to stay in Chapter 7 bankruptcy — and who will be forced to use Chapter 13 bankruptcy if they want to file. Disabled veterans whose debts were incurred during active duty and people whose debts come primarily from the operation of a business get a fast pass to Chapter 7 bankruptcy. All others must meet the requirements set out below.

Under the new rules, the first step in figuring out whether you can file for Chapter 7 bankruptcy is to measure your "current monthly income" against the median income for a family of your size in your state. Your "current monthly income" is your average income over the last six months before you file. If your income is less than or equal to the median, you can file for Chapter 7 bankruptcy.

If your income is more than the median, however, you must pass "the means test" — another requirement of the new law — in order to file for Chapter 7 bankruptcy.

2. You Have Enough Disposable Income to Repay Some Debts

The purpose of the means test is to figure out whether you have enough disposable income, after subtracting certain allowed expenses and required debt payments, to repay at least a portion of your unsecured debts over a five-year repayment period.

3. You Previously Received a Bankruptcy Discharge

You cannot file for Chapter 7 bankruptcy if you obtained a discharge of your debts in a Chapter 7 bankruptcy case within the last eight years, or a Chapter 13 case within the last six years.

4. A Previous Bankruptcy Was Dismissed Within the Previous 180 Days

You cannot file for Chapter 7 bankruptcy if a previous Chapter 7 or Chapter 13 case was dismissed within the past 180 days because of one of the following reasons:

  • You violated a court order.
  • The court ruled that your filing was fraudulent or constituted an abuse of the bankruptcy system.
  • You requested the dismissal after a creditor asked for relief from the automatic stay.

5. You Defrauded Your Creditors

A bankruptcy court may dismiss your case if it thinks you have tried to cheat your creditors or concealed assets so you can keep them for yourself.

Certain activities are red flags to the courts and trustees. If you have engaged in any of these activities during the past year, your bankruptcy case may be dismissed:

  • Unloading assets to your friends or relatives to hide them from creditors or from the bankruptcy court
  • Running up debts for luxury items when you were clearly broke and had no way to pay them off
  • Concealing property or money from your spouse during a divorce proceeding, or
  • Lying about your income or debts on a credit application.

In addition, you must sign your bankruptcy papers under "penalty of perjury" swearing that everything in them is true. If you deliberately fail to disclose property, omit material information about your financial affairs or use a false Social Security number, and the court discovers your action, your case will be dismissed and you may be prosecuted for fraud.

Can You File For Chapter 7 Bankruptcy? Discuss Your Situation With A Lawyer

Contact us at The Law Offices of George Castrataro, P.A., to find out if you qualify for Chapter 7 bankruptcy, or if another type of bankruptcy would be better for your situation. Call our Fort Lauderdale office at 954-573-1444 or email us to schedule a free consultation. We serve clients through southern Florida.