Who Can File for Bankruptcy?
Written by AskTheLawyers.com™ on behalf of David Shuster with Shuster Law, PLLC.
Eligibility requirements to file for bankruptcy may vary from state to state, but in most cases, a person will need to meet several qualifications before filing. Additionally, just because a person does not qualify for one type of bankruptcy does not mean they are barred from filing altogether. Bankruptcies are handled differently for individuals versus businesses and the law can get complicated, so it’s a good idea to talk to a bankruptcy attorney if you suspect you may need to file. It’s important to note that these attorneys may be able to negotiate a smaller settlement for you to pay and identify other means of financial protection for you and your family.
In general, an individual must meet the following requirements to file for bankruptcy:
- Age. Depending on the state, you may have to be 18 years of age or older to file. This is understandable, since many lines of credit cannot be opened for those under the age of 18. However, if you are under the age of 18, you may still have options to file depending on your jurisdiction and how long you have lived there.
- Previous filing status. It’s important to note that if you have already filed a Chapter 7 bankruptcy, you will not be able to file another for the next eight years. If you have filed for Chapter 7 bankruptcy in the last eight years, you may be eligible to file a different type of bankruptcy and should contact a bankruptcy attorney to discuss your options.
- Likelihood of debt repayment. If it is unlikely that you will be able to pay off your debts within the next five years, you may be eligible to file for bankruptcy. This five-year-estimation is a general rule of thumb and not necessarily a dealbreaker, but could indicate your potential for bankruptcy.
- Completion of credit counseling course. Individuals seeking to file for bankruptcy will need to complete a pre-bankruptcy credit counseling course before they are allowed to do so. In many cases, this course may illuminate other options for debt consolidation or loan forgiveness besides bankruptcy.
- The means test. As a general rule, to file for bankruptcy, an individual must pass the means test. To pass the means test you must be able to prove that your average monthly income for the six months prior to filing for bankruptcy falls below the median income of a similar household in your state. This test is by no means a dealbreaker; it is possible to fail the means test and still be eligible to file. A bankruptcy attorney can help you quickly run a means test and explore other options if it looks like you won’t qualify to file.
Bankruptcy will affect your credit score.
Before filing for bankruptcy, it’s a good idea to explore all your options. Unlike some other methods of debt consolidation and repayment negotiation, filing for bankruptcy will adversely affect your credit score for 7 to 10 years after filing. This can make it difficult when looking for a place to rent or trying to get approved for a loan. However, by making smart and intentional financial choices, you should be able to build your credit score back up and when the bankruptcy finally “falls off”, you can be better than ever. This is another reason why it’s a good idea to talk to a bankruptcy attorney before filing. These attorneys understand the ins-and-outs of pre and post bankruptcy for individuals and their families, and they can provide valuable guidance to help with your financial recovery.
To learn if you are eligible or for help filing, reach out to a bankruptcy attorney.