6 Circumstances That Could Disqualify You From Filing Chapter 7 Bankruptcy

People who have a substantial amount of unsecured debt may find relief through bankruptcy. Chapter 7 bankruptcy can be used to discharge debt and alleviate the need to repay lenders. However, there are circumstances that can disqualify you from filing Chapter 7. Here are a few:

How much disposable income do you have?

Disposable income is the amount of money you have left over after your expenses are paid. It is calculated using your most recent six months of income. If your disposable income is lower than the median income of others in your state with the same number of people in their household, you can file Chapter 7 bankruptcy. If your means exceed the median income, you may still be eligible to file bankruptcy. However, you may be restricted to a Chapter 13 bankruptcy, which will require you to pay back some of your debt.

Have you received a Chapter 7 bankruptcy discharge before?

Receiving debt relief from a previous Chapter 7 bankruptcy does not automatically disqualify you from filing Chapter 7 bankruptcy again. However, it can if your discharge was too recent. Eight years must pass between the date you filed your previous Chapter 7 bankruptcy discharge and the date of your next filing.

How long have you lived in your state?

You must have lived in the state in which you are filing Chapter 7 bankruptcy at least 90 days to be eligible to file. If you moved to your current state of residency more recently, your filing must be with the state your resided in before.

Have you hidden or transferred property to try to avoid paying your creditors?

If you have intentionally tried to hide or transfer property to avoid paying creditors in the 12 months before you file bankruptcy, your discharge may be denied. In some cases, your creditors may even be permitted to take back the the hidden or transferred property.

Have you had a bankruptcy dismissed before?

If you filed a bankruptcy case that was dismissed because you failed to adhere to court requirements or you asked for dismissal, you must wait at least six months before trying to file again.

Have you "played favorites" with your creditors?

Your eligibility can be compromised if, within the last 12 months, you have repaid a creditor with whom you have a relationship, such as a relative, but failed to repay other creditors. The money you repaid may be recovered and divided between your other lenders. 

Chapter 7 bankruptcy can be an effective way to remove your burden of unsecured debt. However, you must meet legal qualifications for eligibility. If you would like to file bankruptcy but are unsure of whether or not you qualify for Chapter 7 relief, consult a bankruptcy attorney at a law firm such as Licata Bankruptcy.