When can you not discharge debts through Chapter 7 bankruptcy?

Chapter 7 bankruptcy helps you erase debt from your life within a few months. It won’t be wrong to say that Chapter 7 bankruptcy is perhaps the quickest way to get rid of debt. However, you need to fulfill certain requirements to discharge your debts through bankruptcy. You can’t qualify for this type of bankruptcy just like that. For instance: you can’t opt for Chapter 7 bankruptcy without passing the means test.

Read along to know about the situations when you can’t qualify for Chapter 7 bankruptcy and discharge your debts under court supervision.

Situations when you won’t qualify for Chapter 7 bankruptcy

Here are some situations when you won’t be eligible for Chapter 7 bankruptcy.

1. You want to get bankruptcy discharge for the second time: If you’ve already discharged debts through Chapter 7 bankruptcy in the past 8 years, then the court won’t allow you to get debt relief for the second time. You’ve to wait for some time in order to get discharge through Chapter 7 again. 

2. You cheated your creditors deliberately: If the court feels that you’ve deceived your creditors or hidden assets, then your bankruptcy case will be dismissed for sure. In addition to that, you may be prosecuted by the court. Don’t underestimate the intelligence of the court judge. If you’ve been involved in the following activities, then the court will dismiss your case:

• You have made false statements about your debt and earnings to your creditor.

• You have hidden your assets from your wife/husband during divorce.

• You’re in debt because of luxury expenses. You’ve made those expenditures when you were broke.

• You’re transferring money and assets to your relatives in order to conceal them from court and creditors. 

3. You earn enough dollars to pay back your creditors: The court won’t allow you to discharge debts through Chapter 7 bankruptcy if your income is good enough to maintain a court monitored repayment plan under Chapter 13. The court will compare your current monthly income vs the state median income. If your income is less than the state median income, then you may be eligible for Chapter 7. In case your earnings are more than the state median income, then you’ve to pass the means test in order to qualify for Chapter 7 bankruptcy.

4. You had filed bankruptcy but it was dismissed: You won’t be eligible for this particular type of bankruptcy when your bankruptcy case was dismissed in the past 6 months because of the following reasons:

• You didn’t bother to abide by the court order.

• You voluntarily asked the court to dismiss your case after a creditor wanted to come out of the automatic stay.

• The court dismissed your case as you didn’t follow the bankruptcy laws.

Finally, you need to submit your bankruptcy papers under “penalty of perjury” wherein you pledge that all the items in them are accurate. If you don’t reveal your property, assets, or correct Social Security Number, and the bankruptcy court comes to know about them, then your case will be rejected without any further delay.