Chapter 7 Bankruptcy—Who Can't File

Chapter 7 bankruptcy, often referred to as “liquidation bankruptcy,” allows individuals and businesses to discharge most of their unsecured debts, providing a fresh financial start. However, not everyone is eligible to file for Chapter 7 bankruptcy. Here’s a detailed overview of who cannot file for Chapter 7 bankruptcy:

Table of Contents

1. High Income Individuals (Means Test)

Means Test Requirement: Individuals whose income exceeds a certain threshold based on the state median income may not qualify for Chapter 7 bankruptcy. The means test evaluates income, expenses, and family size to determine if the individual can afford to repay some debts.
Excessive Income: If your average monthly income over the six months preceding the bankruptcy filing is higher than the median income for your household size in your state, you may not qualify for Chapter 7.

2. Prior Bankruptcy Filers

Recent Filings: If you have filed for Chapter 7 bankruptcy in the past eight years, you are ineligible to file again for Chapter 7.
Chapter 13 Bankruptcy: If you have filed for Chapter 13 bankruptcy and received a discharge in the last six years, you cannot file for Chapter 7 unless you have successfully completed the Chapter 13 plan and obtained a discharge.

3. Fraudulent Filers

Fraudulent Behavior: Individuals who have committed bankruptcy fraud, such as providing false information or failing to disclose assets, may be denied the ability to file for Chapter 7.
Concealment of Assets: If you have hidden assets or income with the intent to defraud creditors or the bankruptcy court, your filing may be dismissed.

4. Undisclosed Debts

Failure to Disclose All Debts: If you do not list all your debts when filing for bankruptcy, the court may deny your request for Chapter 7 protection. Full disclosure of all debts is mandatory.

5. Recent Debt Incurrence

Recent Credit Card Purchases: If you incurred significant debt shortly before filing for bankruptcy, especially on luxury items or cash advances, the court may scrutinize your case. This can result in a denial of discharge for those debts, if deemed fraudulent.

6. Current Bankruptcy Cases

If you are currently in a bankruptcy case (either Chapter 7 or Chapter 13) that has not been discharged, you cannot file for another Chapter 7 bankruptcy until the first case is resolved.

7. Certain Legal Entities

Business Entities: Generally, Chapter 7 is designed for individuals and certain types of partnerships. Corporations and limited liability companies (LLCs) file for bankruptcy under different chapters, such as Chapter 11 or Chapter 13.

8. Certain Taxes and Debts

Non-Dischargeable Debts: Even if you qualify for Chapter 7, some debts cannot be discharged in bankruptcy. This includes certain taxes, student loans, child support, and alimony.

Conclusion

While Chapter 7 bankruptcy can provide a fresh start for many individuals, several restrictions exist regarding eligibility. Individuals with high incomes, prior bankruptcy filings, fraudulent behavior, or certain legal obligations may find themselves unable to file for Chapter 7. Consulting with a bankruptcy attorney is advisable to navigate the complexities of bankruptcy laws and assess your eligibility based on your unique financial situation.

Carefully consider the advantages and disadvantages given above before discussing your bankruptcy with an attorney. For more email the firm at [email protected] or call 480-744-7711.