What Disqualifies You From Filing Bankruptcy?
Understanding what disqualifies you from filing bankruptcy can help you take appropriate steps to turn your financial situation around and secure your future. Failing to meet eligibility requirements, previous bankruptcy case dismissal, prior discharge, committing fraud, and failing to pay court fees are factors that could disqualify you from filing bankruptcy in Nevada.
You have a right to pursue bankruptcy protections in Nevada provided you meet the eligibility requirements. A seasoned bankruptcy attorney can carefully examine your situation and determine if you qualify for bankruptcy and which chapter is the right fit.
Find out what disqualifies you from filing bankruptcy from one of our seasoned bankruptcy attorneys at Randolph Law Firm, P.C. Call 702-757-7777 to request a free consultation.
Qualifications for Filing Bankruptcy in Nevada
You must meet the requirements of one of the chapters of bankruptcy to obtain the protection of federal and state bankruptcy laws. Most people seek bankruptcy protection under Chapter 7 or Chapter 13.
Chapter 7 involves selling nonexempt possession, using the money to repay creditors, and discharging most unsecured debts. A Chapter 13 bankruptcy allows you to repay all or a substantial amount of your debts within 3 to 5 years through a court-approved repayment plan.
Chapter 7 Bankruptcy Eligibility Requirements
You must meet the means test to be eligible to file Chapter 7 bankruptcy. In other words, you must prove that you do not have sufficient disposable earnings to clear your debts. The test has two parts. The first part considers your gross income for the past six months before the filing. This income is for the entire household and includes earnings from your spouse.
You will qualify for bankruptcy protection under Chapter 7 if your household income is below your state median income. The median income depends on the number of your family members. Only spouses and minor children qualify as family members.
Currently, the Nevada median annual income stands at $64,412 for a one-person household, rises to $81,020 for a two-person household, increases to $88,992 for a three-person household, and keeps increasing for each additional dependent.
You must undertake the means test if your income is above the Nevada median income. The test will consider your household income, possessions, and expenses to determine if you truly lack the funds to repay your debts. You will be eligible for Chapter 7 bankruptcy if the means test results show that you do not have sufficient income to pay your creditors.
Chapter 13 Bankruptcy Eligibility Requirements
You will qualify for protection under Chapter 13 bankruptcy if you have adequate disposable income to meet monthly debt repayment requirements. Your tax filings must be up-to-date to qualify for this type of bankruptcy. Your secured and unsecured debts must also be below $1,395,875 and $465,275 respectively.
Disqualifications for Filing Bankruptcy
There are several factors that may disqualify you from filing bankruptcy in Nevada.
Failure to Meet Eligibility Requirements
One of the most common reasons filers get disqualified from filing bankruptcy is failing to satisfy the eligibility requirements. You will be disqualified from Chapter 7 bankruptcy if you fail the means test. You will also be barred from filing bankruptcy if you did not obtain credit counseling from a recognized agency within the last 180 days.
Previous Bankruptcy Case Dismissal
Bankruptcy case dismissals are common in Nevada. A dismissal does not bar you from pursuing bankruptcy protections in the future. A wait time applies before you become eligible to file again. This wait time is usually 180 days from when the court dismissed your bankruptcy case.
Prior Discharge
You will be disqualified from filing any form of bankruptcy for a duration if you previously filed bankruptcy and obtained a discharge. The duration varies based on the form of bankruptcy you filed in the past and the type of bankruptcy you want to file.
You must wait for eight years to qualify for Chapter 7 bankruptcy if you had previously filed under the same type of bankruptcy and obtained a discharge. Similarly, you must wait six years to be eligible for protection under Chapter 7 if you secured a Chapter 13 discharge or two years if you are considering filing under Chapter 13 again.
There are no restrictions on the number of bankruptcies you can file. The state, however, limits how often you can secure a debt discharge.
Committing Fraud
The court may disqualify you from obtaining bankruptcy protection if it finds that you have committed fraud. Concealing assets, giving false information on your bankruptcy petition, forging loan applications, and failing to reveal a previous bankruptcy are examples of common fraudulent activities.
Failing to Pay Court Fees
Filing fees and other charges apply to all types of bankruptcy. You can pay the fee either in full or in installments. You may be eligible for a waiver if you cannot afford these fees.
You can request a fee waiver by completing a form and filing it with your bankruptcy petition. The judge may grant the request if your household income is below the Nevada official poverty line, and you cannot afford to pay in installments. Your case will be dismissed if you fail to pay the required fees on time.
Recent Loan Repayments to Relatives and People in Your Social Circle
You may be disqualified from bankruptcy filing if you made loan repayments to relatives, coworkers, or friends. These payments are deemed “preferential transfers” and the bankruptcy trustee may recover them to repay your creditors.
Receiving Money From Illegal Sources
The court will disqualify you from filing for bankruptcy if you obtain money from illegal sources, including gambling or selling drugs. The reason is that bankruptcy is meant to offer relief to honest debtors who cannot repay their creditors because of situations outside their control.
What Are the Consequences of Attempting to File Bankruptcy When Disqualified?
The most obvious consequence of attempting to file bankruptcy when disqualified is the dismissal of your case. You will lose automatic stay, which tentatively stops creditors’ collection activities, after dismissal. This means creditors can continue collection activities, such as harassing phone calls and emails, property repossessions, foreclosures, debt collection lawsuits, and wage garnishments.
A dismissal can stay on your record for up to 10 years for Chapter 7 bankruptcy and up to 7 years for Chapter 13. Creditors and lenders will consider you high risk and will most likely deny you credit or a loan if you have a recent bankruptcy case dismissal.
A dismissal can result in limitations on when you can file another bankruptcy case. The court may impose a wait time of 180 days before you are eligible to file again. The court may also bar you from discharging any debts listed in the dismissed case.
Property managers or owners may be reluctant to approve your rental application if you have a recent bankruptcy dismissal in your credit report. They assume applicants with a dismissed case do not have adequate disposable income to pay for the rental apartment or house.
A recently dismissed bankruptcy filing may make it difficult for you to secure a job, particularly in the private sector. Private employers may lock out candidates with pending or dismissed bankruptcy cases from jobs involving money like bookkeeping and payroll.
Why Hire a Nevada Bankruptcy Attorney?
You stand a better chance of securing a favorable outcome in your bankruptcy case if you hire an attorney than if you represent yourself. Data from the American Bankruptcy Institute shows that 96% of Chapter 7 bankruptcy filers working with an attorney secure a debt discharge, compared to 66% representing themselves. Chapter 13 filers represented by an attorney have a 41.5% success rate, while their self-representing counterparts have only a 2.3% success rate.
An experienced bankruptcy attorney knows that each case is unique. The attorney will carefully scrutinize your financial situation, assess your options, and offer advice and guidance that suit your needs.
Your attorney will help you complete all the required forms and file them on time. The attorney will also outline what disqualifies you from filing bankruptcy to keep you from making mistakes that can get your case dismissed and ruin your financial future.
Your attorney will help you develop a realistic expectation regarding how filing bankruptcy will affect different aspects of your life in the short and long term. The attorney will achieve this by discussing whether bankruptcy clears all debt, the impact of bankruptcy on taxes, and long-term consequences on your credit and job prospects.
At Randolph Law Firm, P.C., we can tailor a debt relief solution that addresses your financial needs. Contact us for a free debt assessment and consultation with our knowledgeable bankruptcy attorneys.
