Debtors, as a class or group, have a right to file for bankruptcy. However, that does not mean that every debtor can file for bankruptcy whenever they want. There are several limitations on when or how often a debtor can file bankruptcy.
Petition Previously Dismissed Within Last 180 Days
If a previous bankruptcy petition was dismissed during the past 180 days (6 months) due to--
- The debtor's willful or deliberate failure to appear before the court or comply with court orders
- The debtor's voluntary dismissal of the petition after creditors sought relief from bankruptcy to recover property on which they have liens
--the debtor cannot file again so soon. He or she has to wait past the 180-day mark.
Failure to Receive Credit Counseling
To file bankruptcy, an individual must have received credit counseling from an approved credit counseling agency sometime during the 180 days prior to filing. (At least this requirement gives a debtor waiting out the 180-day period--see above--something to do in the meantime.)
Received a Discharge in a Previous Bankruptcy Too Few Years Ago
For a Chapter 7 filing, if the debtor received a discharge--
- Under Chapter 7, within the past eight years
- Under Chapter 13, within the past six years (in most cases; there are some exceptions)
--the debtor will not be able to receive a discharge of his or debts. In this case, technically, the debtor can file bankruptcy, but why bother? If you can't receive a discharge, filing bankruptcy does not avail you much.
Similarly, for a Chapter 13 filing, if the debtor received a discharge--
- Under Chapter 7, within the past four years
- Under Chapter 13, within the past two years
--the debtor cannot receive a discharge.
Chapter 7: Too Much Income
If the debtor's "current monthly income" is greater than the state median, a "means test" will be applied to determine eligibility for filing. (Remember, the median is not the average, also known as the "mean"; the median income is the middle income number, such that half the state's population earns more and half earns less.) Under the means test, if the debtor's monthly income over the last 5 years (after netting out certain expenses allowed by law) is more than $11,725 or 25% of the debtor's nonpriority unsecured debt, the debtor cannot file under Chapter 7. Instead, his bankruptcy filing will be converted to Chapter 13 or dismissed, at the debtor's option. (If a debtor fails the means test, it's sometimes possible to challenge that outcome and still file under Chapter7, but succeeding at the challenge is neither easy nor certain.)
Chapter 13: Too Much Debt
A debtor can't file under Chapter 13 if his unsecured debt exceeds $360,475 or his secured debts exceed $1,081,400. Since secured debts include mortgages, home equity lines or loans, and car loans, a debtor living in a high cost area (e.g. San Francisco, metropolitan New York) could easily exceed this threshold.
Talk to a Bankruptcy Attorney
The bankruptcy rules can be very technical. Especially for high income and/or high debt individuals, it's not always easy to qualify for bankruptcy, or at least the bankruptcy of the debtor's choice. An attorney can help a debtor understand his options and eligibility under the Bankruptcy Code.
