Can I File for Bankruptcy? Eligibility Rules

A common question asked by debtors considering all available debt relief options includes “Can I file for bankruptcy?” Since the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, the eligibility rules for filing bankruptcy, specifically consumer bankruptcy in form of Chapter 7 and Chapter 13, have become more stringent. The following generally outlines the eligibility rules for filing Chapter 7 and Chapter13.

Eligibility under Chapter 13

Eligibility for Chapter 13 is significantly less stringent than that associated with Chapter 7 petitions, however, there are still some basic eligibility requirements, including:

• Petitioner must be an individual, joint filer, or unincorporated business with less $360, 475 in unsecured debts and no more than $1,081,400 in secured debts.

• Petitioner must have completed credit counseling from a federally-approved agency within one hundred and eighty (180) days prior to filing.

• Petitions cannot have had a bankruptcy petition dismissed within one hundred and eighty (180) days due to failure to comply with the courts orders.

Generally, the courts will also consider the viability of a repayment plan, including looking into whether the debtor has a viable, consistent means of repaying the debts.

Eligibility under Chapter 7

The following outlines eligibility qualifications to file under chapter 7, including:

• Petitioner is subject to means test; however, individual/joint petitioners with current household income less than state median for household of same size can forgo the means test in Chapter 7.

• Means test a complicated, case-specific calculation that ultimately determines if petitioner has sufficient expendable income to repay debts over time, specifically a five-year period similar to Chapter 13. If unable to pass means test, debtor’s petition likely moved into Chapter 13.

• Petitioner must have received credit counseling from federally-approved agency within the last one hundred and eighty (180) days.

• Petitioner cannot file again within a one hundred and eighty (180) day period, if previous filing dismissed due to failure to comply with court orders, or debtor had voluntarily dismissed a prior petition.

• Business entities are not eligible for discharge, however, individuals and joint filers are eligible for discharge in Chapter 7.

Getting Legal Help with Eligibility to File Bankruptcy

The aforementioned items cover only the most basic eligibility requirements for filing, and in practice, a number of case-specific considerations may alter or change one’s eligibility to file. Likewise, simply being eligible to file is not necessarily indicative that a given chapter of bankruptcy will actually alleviate debt issues. In short, the only reliable method of determining your specific eligibility, as well as how bankruptcy may help, will be through consulting with a bankruptcy lawyer in your current state of residence.