Complete Guide On What Disqualifies You from Filing Bankruptcy in the US

What disqualifies you from filing for Bankruptcy? 

It’s not always as simple as the amount of your debt or income. Legal, financial, and procedural factors can also prevent you from filing for Bankruptcy. And other options may be more suitable for resolving your debt problems than Bankruptcy. Let’s break down exactly who qualifies and who doesn’t.

Filing for Bankruptcy is the last option when the debt spiral is out of control. But not everyone qualifies. There are strict rules about who can and cannot file, and violating these rules can disqualify your case.

The US Bankruptcy Code sets clear standards depending on the type of Bankruptcy you file. For consumers, either Chapter 7 or Chapter 13 is the most common type of Bankruptcy. Chapter 11 is usually, but not always, a business bankruptcy, handling cases to reorganize debt over $1,000,000, and is unusual for an individual or spouses to file. Let’s review all the disqualifying conditions for Chapter 7 and Chapter 13 at the same time.

Legal Factors That May Disqualify You from Filing for Bankruptcy

Many people believe that Bankruptcy is available to everyone who is struggling to pay their debts. But there are clear legal thresholds and red flags that can block you from proceeding with a case, even though technically, someone can still file it.

Failure to Complete Credit Counseling

Before filing, by law, you must complete credit counseling from an approved provider within 180 days. Want to skip this step? You’ll be disqualified, and the Court will automatically dismiss your case.

Previous Bankruptcy Discharges

Timing matters. If you’ve filed before and received a discharge, there’s a waiting period before you can file again:

• Chapter 7 after filing Chapter 7: 8 years
• Chapter 13 after filing Chapter 7: 4 years
• Chapter 7 after filing Chapter 13: 4 years
• Chapter 13 after Chapter 13: 2 years

Filing outside of these timelines results in your case being ineligible for discharge, a court order eliminating your debts. However, in certain circumstances, the goal of filing for Bankruptcy may not be a discharge, but instead, be a strategy to “buy time” and protect assets.

High Income That Fails the Test

Chapter 7 bankruptcy wipes out most types of unsecured debt. If your income exceeds the state median for your household size and you fail the test, you may be disqualified from Chapter 7 and required to proceed with Chapter 13 repayment instead.

Intentional Dishonesty or Fraud

If the Court:

• Hiding assets
• Lying about income
• Transferring property to avoid debt

You could be disqualified and face criminal charges, such as fraud or perjury.

Too Much Disposable Income (for Chapter 7)

Even if your total income is modest, if your disposable income after necessary expenses is high enough to repay creditors at least 25% of your debt over 3-5 years, you may not be eligible for Chapter 7. Instead, the Court requires you to file under Chapter 13.

Dismissed Bankruptcy Case in the Last 180 Days

If your Bankruptcy was  dismissed after a creditor filed a motion to lift the stay or because you failed to comply with court orders, you may be barred from filing again for 180 days after your case was initially dismissed.

This rule is designed to prevent abuse of the bankruptcy system, particularly when it appears that the primary purpose of the filing was to delay creditors from collecting.

What Disqualifies You from Filing Bankruptcies Under Chapter 7 vs Chapter 13

Not all bankruptcies are the same. Chapter 7 and Chapter 13 are the two most common types of consumer bankruptcy, but they have different eligibility requirements and very different disqualifiers.

Let’s break down the reasons you might be ineligible for each chapter and how to know which one is best for you.

Chapter 7 Bankruptcy Disqualifiers

Chapter 7 is a program to eliminate most, but not all, unsecured debts (like credit cards and medical bills). However, not everyone who wants to benefit from this program’s advantages qualifies. Because in most Chapter 7 cases, the person filing doesn’t pay their creditors anything, the law doesn’t consider it appropriate for those who can afford to pay something on their debt, even if the amount they can pay might be as little as $100/month.

The Chapter 7 Means Test

The means test serves as a central gatekeeper for filing Chapter 7. In the Means Test, it calculates whether, after taking all available deductions, there is enough income to repay at least some debts. Of course, when there are extraordinary circumstances, someone will have the opportunity to present these reasons to the Court, such as a Chapter 7 might be appropriate.

If your current monthly income is higher than the median income in your state for your household size, you must complete the full means test.

If the test shows you have disposable income that could be used to pay creditors, you may be disqualified from Chapter 7. As a result, your Chapter 7 might be dismissed or converted to Chapter 13.

Excess Non-Exempt Assets

While rare, if you have too many non-exempt assets (things that the Court can liquidate), it may make Chapter 7 less favorable. Many people choose Chapter 13 to protect their assets by paying their creditors the value of assets that they could otherwise seize, thereby retaining their property.

Disqualifying Past Filings

You cannot receive a discharge in Chapter 7 if:

• You received a Chapter 7 discharge in the last 8 years or
• A Chapter 13 discharge within the past 6 years (with some exceptions).

Chapter 13 Bankruptcy Disqualifiers

Chapter 13 involves creating a 3-to 5-year repayment plan based on your income. It’s more flexible than Chapter 7. Chapter 13 can discharge certain debts that Chapter 7 can’t eliminate, allows someone to keep all of their belongings, even those not protected by an exemption, and can provide time to repay debts that someone needs to pay despite any bankruptcy, such as certain tax debts, past-due mortgage, car payments, alimony and child support debts, and debts relating to criminal or other improper activities, such as driving while under the influence of alcohol or drugs.

Debt Limits

Chapter 13 has strict debt thresholds:

• Unsecured debts (like credit cards) must be under $465,275
• Secured debts (like mortgages, car loans) must be under $1,395,875
  (as of 2024 figures)

If your total debts cross these limits, you may be disqualified from Chapter 13. In that situation, you may have to elect to proceed in a Chapter 11 case, which is far more expensive. However, as creditors may not file a claim in your case, it may be possible to proceed with a Chapter 13 bankruptcy, even if the amount of debt exceeds the threshold.

Regular Income Requirement

You must show the Court that you have a reliable, regular income sufficient to pay the monthly payments during the term of a Chapter 13 repayment plan. No steady income? Then chapter 13 isn’t an option. However, in some instances, alternatives may exist, such as a family member agreeing to provide you with a regular sum of money each month.

Multiple Prior Dismissals

If you’ve had two or more bankruptcies dismissed within the last year, the automatic stay (which protects you from collection) might not apply, and you might not be able to protect yourself. In addition, the Court dismisses your new case altogether. If you file a case, please understand that it is subject to requirements that may not be immediately apparent to a layperson.

Failure to File Required Documents

Failing to submit the required documentation (tax returns, pay stubs, repayment plan, etc.) or not acting in good faith will result in immediate disqualification.

Comparing Chapter 7 and Chapter 13 Disqualifications

Factor	Chapter 7	Chapter 13
Means Test Required?	Yes	Yes, but only determines how long the plan must last.
Income Limits?	Yes (must be below state median or pass the Means Test)	No, but must have a regular income
Debt Limits?	No	Yes (secured and unsecured)
Prior Discharge Waiting Period	8 years from filing a Chapter 7, 4 years from filing a Chapter 13	2 years from Chapter 13
Asset Protection	Less protection (possible liquidation of unexempt property)	More protection (you keep assets)

Actions That Could Disqualify You from Filing for Bankruptcy

Legal and financial conditions determine whether you qualify to file. Many people discover their mistakes after they’ve already filed. This may result in their bankruptcy cases being dismissed or denied. 

Let’s learn the most common behaviors and missteps that can disqualify you from filing for Bankruptcy or ruin your chance of receiving a discharge.

Fraudulent Transfers and Hidden Assets

One of the fastest ways to be disqualified from filing for Bankruptcy is by trying to hide assets or transfer property out of your name before filing. The Court reviews your financial activity over the past two years or more. The organization that conducts the examination is a sister-agency of the FBI, as both the Bankruptcy investigators and the FBI are part of the US Department of Justice.

Examples of Disqualifying,

• Gifting a car to a relative to prevent it from being liquidated by a trustee “just in case.”
• Moving large sums to a friend or family member’s account.
• Selling property to family or friends for less than market value.
• Failing to report valuable items like jewelry, artwork, or collectibles.

If you’re caught, the Court may dismiss your case with prejudice, meaning you can’t refile at some point in time. Worse, you could be charged with bankruptcy fraud and perjury, federal crimes with severe penalties. For an entertaining review of these types of cases, Google the phrase “Real Housewives Bankruptcy.”

Incomplete or Inaccurate Bankruptcy Filings

Bankruptcy requires a lot of paperwork. You’ll need to file:

• A full list of creditors
• All sources of income
• A detailed breakdown of monthly expenses
• Tax returns, pay stubs, and more

Filing incomplete or intentionally misleading forms is one of the most common reasons for disqualification. Any mistakes can delay or derail your case. It is essential to double-check everything and seek assistance from an experienced bankruptcy attorney.

Using Bankruptcy to Delay or Manipulate Creditors

Bankruptcy isn’t a tool to dodge or buy time indefinitely. Filing multiple just to trigger the automatic stay (which pauses collections and foreclosures) is seen as abuse. If the Court finds a pattern of bad-faith filings, it may:

• Dismiss your case
• Deny the stay
• Disqualify you from refiling for months or years

If you’ve had a bankruptcy dismissed within the last 180 days for failing to obey court orders or appear at hearings, you’re also automatically disqualified from refiling during that period.

Withholding Tax Returns or Lying About Income

Another major red flag is failing to submit tax returns or misrepresenting your income. The bankruptcy trustee reviews your financial history thoroughly. If your reported income doesn’t match IRS filings or bank statements, your case can be disqualified for dishonesty or incomplete documentation. Of course, these decisions can also involve criminal charges.

You’re also expected to pay your ongoing taxes promptly during the bankruptcy process. Failing to do so may cause dismissal in Chapter 13, where your repayment plan is based on income estimates.

Conclusion

Filing for Bankruptcy is a powerful financial reset button, but it’s also a legal process. If you think what disqualifies you from filing for Bankruptcy, the answer is mixed, involving timing, income, past filings, debt levels, legal expertise, and, most importantly, your honesty and transparency.

FAQs

Can I be disqualified from Bankruptcy just because I earn too much?

Yes, for Chapter 7. If your income is above your state’s median and you fail the means test, you may be disqualified from Chapter 7. However, you could still qualify for Chapter 13, which requires you to repay some or all of your debt (but often at 0% interest). 

What happens if I file for Bankruptcy too soon after my last case?

You may be temporarily disqualified from receiving another discharge. For example, you must wait 8 years between Chapter 7 filings, or 2-6 years between other chapter combinations. Filing too soon may result in your case being dismissed or ending without a discharge.

Can hiding money or assets disqualify me from Bankruptcy?

Absolutely. This is one of the most serious violations. If you hide assets or lie under oath, you risk case dismissal, a ban on refining, and criminal charges for bankruptcy fraud.

Does a dismissed bankruptcy case mean I’m permanently disqualified?

Not always. If your case was dismissed for a procedural reason (like missing a document), you may be able to refile immediately. But repeated dismissals or dismissals with prejudice could block you from refiling for 180 days or longer. If you file without legal representation and your case is dismissed, learn from this experience and retain an experienced attorney to represent you. The cost may not be as high as you thought.

Can I still qualify for Bankruptcy if I have a high income but lots of debt?

Of course. If you can’t pass the Chapter 7 means test, you might still be eligible for Chapter 13. But many high-income earners may have large payments for expenses that are deductible on the Means Test, such as mortgage payments, tax costs, child care, support to elderly or disabled relatives, and medical expenses