Examples of Consumer Characteristics That Disqualify Debtors for Chapter 7 Bankruptcy

In many cases, the decision of which type of bankruptcy a debtor will file for will depend on eligibility. Those considering filing for a Chapter 7 bankruptcy need to be aware of the characteristics that could disqualify them. 

The following are the most common characteristics a consumer might have that will disqualify him or her for a Chapter 7 bankruptcy filing:

An income that's too high

The easiest way to qualify for a Chapter 7 bankruptcy is to have an income that's below the median income amount in the consumer's state of residence.

Having an income that's less than the median income value for a family of the same size in the same state of residence will usually automatically qualify a consumer for Chapter 7 bankruptcy. 

Qualifying for a Chapter 7 is more complicated for those with an income that's higher than the state median income value. These consumers must avoid any of the characteristics mentioned below to qualify for Chapter 7. 

A Chapter 7 bankruptcy filing in the past

Those who have already filed for a Chapter 7 bankruptcy in the past may not be eligible to file again.

Consumers who have filed a Chapter 7 bankruptcy within the previous eight years cannot file for another Chapter 7 bankruptcy. Those who have previously filed a Chapter 13 bankruptcy generally have to wait six years before being able to file for Chapter 7 bankruptcy. 

No credit counseling

Consumers cannot file for Chapter 7 bankruptcy unless they have first sought out credit counseling.

Credit counseling is not only a requirement, but also a good idea. Consumers can use the information attained through counseling to determine which type of bankruptcy filing is best for their unique situations. 

Guilty of defrauding creditors

Sometimes, bankruptcy court rules that a consumer is ineligible for Chapter 7 bankruptcy because he or she has attempted to defraud creditors in the past. The court can make this ruling because of a variety of different actions on the part of the consumer. 

For example, a debtor might be considered to have defrauded creditors if he or she has made an attempt to transfer the ownership of property to another individual to avoid having to sell off that property to pay outstanding debts.

Also, a debtor could be considered to have engaged in fraudulent activity if he or she lied about income level on an application for credit or purchased luxury items before attempting to file for bankruptcy. For more information, talk to a professional like FactorLaw.