Can you be denied from filing bankruptcy? Not really. Can your case be dismissed after you file bankruptcy? Yes, it can. Can you be denied a discharge after you file bankruptcy? Yes. The following article summarizes some of the issues that may prevent you from accomplishing the purpose of gaining a fresh start by filing a bankruptcy case.
Before filing bankruptcy, a prospective debtor under any chapter of the Bankruptcy Code must receive, within 180 days before filing, credit counseling from an approved credit counseling agency. If a debtor fails to meet this requirement, the court will dismiss the debtor’s bankruptcy case shortly after filing. A debtor may be denied a discharge of the entire case if he or she fails to complete a post-petition financial management course.
However, the primary prerequisite for determining eligibility to file a Chapter 7 bankruptcy case is the completion of what many refer to as the “means test.” Most individual debtors filing for bankruptcy relief are required to complete a version of Bankruptcy Form 122. This requires a debtor to enter information related to income and expenses on this form and then make calculations based upon the information entered.
The means test is a formulaic process created by the members of the 109th Congress who enacted the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). It is designed to keep those with high income from filing a Chapter 7 bankruptcy case. High-income filers who “fail the means test” may turn alternatively to a Chapter 13 bankruptcy case for relief but must repay some portion of their debts as a tradeoff.
Only those filing bankruptcy with primarily consumer and not business debts, need to make the calculations required by the means test. The means test does not prevent those with high income – with many expenses – from filing Chapter 7.
The first step is a simple process that requires you to compare your current monthly income to the median income for a household of your size in your state. If your income is less this median income amount, you pass. More importantly, you are eligible to file a Chapter 7 bankruptcy case and are done with the means test. You do not need to complete the remainder of the long, voluminous form that comprises the test.
If your income is greater than the median amount, then the means test becomes much more complicated. You must determine whether you have enough disposable income after paying your allowed monthly expenses to pay off some portion of your unsecured debts. If your disposable income adds up to more than a certain amount, you fail the means test and are not eligible for a Chapter 7 discharge. The alternative is filing under Chapter 13 or even Chapter 11 if the amount of your debts exceeds the Chapter 13 debt ceilings.
So while you may be prevented from filing a Chapter 7 case, you are not entirely prevented from filing bankruptcy since you are still able to file a Chapter 13 case.
You can be denied a bankruptcy discharge but this happens rarely. The most common occurrence is when a debtor has engaged in fraud against his or her creditors. A more common occurrence, but still rare, is being denied the discharge of a single debt on a legal basis. The following code sections discuss the bankruptcy discharge and exceptions to discharge: 11 U.S.C. §727 and 11 U.S.C. §523.
Even more rarely, a debtor may be denied a discharge of his complete case for more serious offenses that include fraudulent transfers before the filing of a bankruptcy, false or untrue information in the filed bankruptcy schedules, and concealing assets with intent to defraud creditors. If a debtor has received a discharge from a previous bankruptcy within a certain time he or she may be ineligible to file.
One of the Morrison Law Group’s qualified and knowledgeable bankruptcy attorneys may answer any bankruptcy debtor’s questions about any relevant bankruptcy law. The Morrison Law Group can also help if you just want to talk about Chapter 7 or Chapter 13 bankruptcy options. Call 801.456.9933 today to schedule a FREE consultation. We have locations in Ogden, Logan, Sandy, and St. George to serve the residents of the counties of Weber, Cache, Salt Lake, Utah, Morgan, Davis, Washington, and surrounding areas.