Who Can’t File Bankruptcy?

Many people think that anyone who chooses can file bankruptcy because after all, Donald Trump did and many other people that appeared to be richer than God. Contrary to popular belief though, not everyone can just decide to file.

Who Can’t File Bankruptcy (and Probably Shouldn’t Even Try)

1.  Those With Enough Money to Pay Debts:  Obviously if you have enough income to repay your debts, if you’re looking to file bankruptcy, it appears as though you’re just trying to get out of paying your bills. The “means test” will calculate how much income you have to repay your debts after allowed expenses are deducted. If you do not pass the means test, then you will not be able to file a Chapter 7 bankruptcy.

2.  Your Income is Too High:  Again, you may look at Donald Trump and think this is ridiculous, but the new bankruptcy law measures your current income against the median income for a family of your size in your state. If your income is over, you have to pass the means test mentioned before.

3.  You Already Filed Bankruptcy:  You cannot file bankruptcy again if  you have filed either a Chapter 7 in the last 7 years or a Chapter 13 in the last 6 years.

4.  You Are Lying About Your Finances:  The bankruptcy court will dismiss your case if they find out you are trying to defraud creditors, have lied about your income or have engaged in any fraudulent activity like unloading valuable assets with friends and family. Not only could the case be dismissed but you may also be prosecuted for fraud.

5. A Previous Bankruptcy Was Dismissed in the Last 180 Days:  If for some reason you filed bankruptcy and it was dismissed within the last 180 days, you cannot file yet. Some of the reasons a bankruptcy may be dismissed could be if you violated a court order in some way, the court ruled the bankruptcy as fraudulent, frivolous or an abuse to the courts, or you asked for a dismissal when a creditor asked for relief from the automatic stay.

6.  Certain Businesses Cannot File Bankruptcy:  There are some businesses that cannot ever file bankruptcy. Some examples are insurance companies, banks and estates.

In most cases though, you yourself know when you have no other choice and cannot pay all of your bills and still survive. Bankruptcy is generally a very last resort. If you can budget and cut out unnecessary expense, it’s always a better choice.