When Can I File Bankruptcy?

Chapter 7 Income Requirements

In some cases, a judge may overrule your petition to file for Chapter 7 bankruptcy, liquidation and debt forgiveness, if he determines you have enough disposable income to pass through Chapter 13, which creates a court payment plan to repay your debtors. If you earn less than the median income for a household of your size for your area, you qualify for Chapter 7, or if you're veterans who hit financial troubles during active duty or a business owner. If you're not, you must pass a means test that measures your ability to repay a portion of your debt using income and certain non-exempt assets, in Chapter 13. If the court deems that you're a better fit for Chapter 13 than Chapter 7, your filing will be denied.

You may only file for Chapter 13 bankruptcy protection if your unsecured debts total $307,675 as of March 2011 and you carry no more than $922,975 in secured debt, or debts where property is used as collateral, such as financed homes and cars. If your debt level doesn't exceed allowances, you must also have enough income to cover your living expenses with enough disposable income to provide to your debtors under a repayment plan. If you file for Chapter 13 and don't demonstrate enough available income, a judge may deny your request, recommending you for Chapter 7.

If you previously filed for bankruptcy, you may not be able to file for Chapter 7 protection. If you filed Chapter 7 bankruptcy any time in the last eight years or Chapter 13 any time in the preceding six years, you are ineligible for a second Chapter 7 filing. If you filed for either form of bankruptcy within the past 180 days, and the bankruptcy was dismissed by your request or if you violated court agreements or were found to be abusing the bankruptcy system, you're also ineligible to file for Chapter 7 or Chapter 13.

Bankruptcy laws are designed to help debtors escape crippling debt with a fresh start, not to give irresponsible spenders a way to shrug off past debt. If the court concludes that you're attempting to defraud bankruptcy proceedings by hiding assets, giving away property to friends and family, lying about income or debts during filing, a judge is likely to dismiss your case. Debtors who go on a spending spree and purchase luxury goods with no intention of paying for them may also be denied bankruptcy protections.