If you decide to file for a Chapter 7 Bankruptcy, you must determine if you are eligible first. Naturally, the first question for eligibility is your income. In order to file a Chapter 7, your “current monthly income” should be less than the “median income” for a similar sized family in your state. You can find this information here. In order to determine your “current monthly income”, you should average your income over the previous six (6) months before you file.
In the event that your “current monthly income” is above the state median, you are not automatically barred from filing. You may still be eligible to file a Chapter 7 if you pass the “means test.” In order to determine if you pass the “means test”, utilize the free online calculator, found here. If you do not pass the “means test”, you may still be eligible for a Chapter 13 Bankruptcy. In addition to your income, there are other technical considerations that could bar you from filing.
If you received a Chapter 7 discharge in the past eight (8) years, you cannot file for another bankruptcy. Similarly, If you received a Chapter 13 discharge in the past (6) years, you cannot file for another bankruptcy. In a related vein, if either form of bankruptcy was dismissed by the bankruptcy court within the last 180 days, you may not file again. These reasons include: (1) violating an order of the Court; (2) requesting dismissal after a creditor tried to avoid the “automatic stay”; and (3) using the Bankruptcy process to defraud creditors.
For example, in a bankruptcy, the Court has the authority to dismiss your case if they believe you are trying to defraud your creditors and keep assets for yourself. Certain conduct will trigger high scrutiny from the court and trustees. If you have performed any of the following actions one (1) year prior to filing, your bankruptcy may be dismissed.
- Got rid of your assets to people close to you, in an effort to avoid having to disclose them in your bankruptcy.
- Purchased large amounts of high-cost items, when you did not have the means to pay for those items.
- Hid assets from your spouse during a dissolution case.
- Were untruthful regarding debts and assets on an application for credit.
It is never a good idea to be dishonest with any court. In your bankruptcy filing, you must sign all of your documents “under penalty of perjury.” If you are dishonest in any of your filings, and the court uncovers that dishonesty, your case will likely be dismissed. If your dishonesty is severe enough, you may even face separate criminal charges. A bankruptcy is an opportunity to obtain a “fresh start”, so it is vital to be completely transparent with the court all your assets and debts.