When can I not file a Chapter 7?

Between Chapter 7 bankruptcy and Chapter 13 bankruptcy, more Americans file a Chapter 7. However, there are some circumstances where the bankruptcy courts may prohibit certain individuals from filing a Chapter 7 bankruptcy.

It used to be that whether or not an individual could file Chapter 7 was up to an individual bankruptcy judge. However, the law changed drastically in 2005 in order to weed out individuals who might be able to pay back debt under Chapter 13. According to FindLaw, you are ineligible for a Chapter 7 bankruptcy if your income is too high, if you have recently discharged debt through a prior bankruptcy or if there is evidence that you have defrauded creditors.  

Why does income matter?

In order to file a Chapter 7 bankruptcy, the courts will subject your income to a means test. The exact amount of the means test varies between states. If your income is below the means test level, you can file a Chapter 7 bankruptcy. If your income is too high, you generally must file a Chapter 13 bankruptcy instead.

There are some exceptions to this. It is possible to have an income that exceeds the means test if the dollar amount of your “necessary expenses” is high enough to negate expected discretionary income.

What about previous bankruptcies?

While it is possible to file multiple bankruptcies over the course of a person’s life, there are limits to how often you can do so. If you have filed a Chapter 7 bankruptcy within the past 8 years or a Chapter 13 Bankruptcy within the past 6, then you may not file for another Chapter 7 bankruptcy.