petition is a case filed in the court requesting that a person be declared legally bankrupt. The case may be filed by the person directly affected by the decision or by debtors or creditors of the said individual.
Eligibility for Filing a Petition
Determining your capacity to file a bankruptcy petition depends on whether you do NOT fall into any of the disqualifying cases. If you happen to meet one or more of the following situations, then your bankruptcy petition will be denied:
- High Income
Generally, petitioners with an income less than the median in their current location are automatically allowed to file for bankruptcy. If your income is above average however, further proof is necessary to get your petition approved. This proof usually comes in the form of a Means Test or when your disposable income is computed based on existing income and debt. After subtracting all the necessary day-to-day expenses, how much money is left over? Any disposable income may be used towards the payment of the debt which disqualifies a person from a Chapter 7 bankruptcy petition.
- Previous Bankruptcy Case Dismissed
If you’ve filed for bankruptcy at any time within the last 180 days and such case was dismissed, another filing will garner the same reaction. Note though that this rule only applies in instances when the dismissal was due to: fraud, violation of a court order, filer requested a dismissal.
- Previous Bankruptcy Discharge
A bankruptcy discharge essentially means that the bankruptcy petition was APPROVED, thereby discharging the debts. In a dismissed case, the petition is DENIED, therefore bearing no effect on the filer’s finances. For a Chapter 7 petition, any discharge made within the last 8 years disqualifies a person from filing again. In cases of Chapter 13 Bankruptcy however, no discharge must be made within the last 6 years.
- No Credit Counseling
Credit counseling is now considered an essential requisite of filing for bankruptcy. The counseling is performed 6 months before the petition is filed in the courts. The rationale here is that the petitioner has already exhausted all possible options of discharging the debt and found that a bankruptcy declaration is the only other viable option.
In some cases, declaring bankruptcy is a means of defrauding creditors. If during the course of the petition it becomes obvious that the filing has elements of fraud, the court may decide to dismiss the action entirely. Signs of fraud may be evident from the actions of the petitioner which includes: buying luxury items, transfers property to friends/family, lies about income and debt, and destroys property.
A thorough assessment is usually required by the State before any discharge is made. Typically, it is recommended that you look into bankruptcy if you’re faced by the following problems: out of work for a long time, having delinquent taxes, bills from pending lawsuits, a house about to be foreclosed, and others.
Prior to filing a bankruptcy petition, it’s important that you first make sure that you tick all the boxes in terms of eligibility. Fortunately, there are websites today that offers a free evaluation on your finances and provides a rational opinion on whether bankruptcy is for you or not. Make sure to utilize all these resources before pushing through with this decision!