Are you disqualified from filing for bankruptcy?

You may be considering filing for bankruptcy because you are overwhelmed with debt. Bankruptcy has helped several people get a fresh start on their financial lives, but there are matters that can disqualify you from filing Chapter 7 bankruptcy or Chapter 13 bankruptcy. We will examine those matters below:

Debts Previously Discharged in Bankruptcy

If you filed for Chapter 7 bankruptcy in the past, you cannot file again if eight years have not passed since the last time you filed. Therefore, if you can wait until eight years have passed since you filed your last bankruptcy, you will need to do so.

If you filed for Chapter 13 bankruptcy in the past, you will only need to wait two years from the date you last filed.

If you would like to file for bankruptcy because you have several high debts, these debts may not qualify. If your debts are ineligible to be discharged, you cannot file for Chapter 7 or
Chapter 13 bankruptcy.

Debts that do not qualify include the following:

Debts You Owe in a Personal Injury or Wrongful Death Lawsuit

If you were driving under the influence when you caused an accident and someone died, you will not be able to discharge this debt. These debts are not allowed because the courts want to discourage people from driving while under the influence of drugs or alcohol. They also want to make sure that the injured party receives adequate monetary compensation.
Student Loans

In most cases, you cannot discharge your student loans in bankruptcy.

Tax Debts

You can have income tax debts discharged if they meet the criteria. You must be seeking to discharge tax debts for tax returns that were filed two years previously. In addition to that, the taxes you wish to discharge must have been accruing three years before you file for bankruptcy.

If you committed tax fraud or attempted to evade your tax liability, these actions disqualify your tax debts from being discharged.

Alimony and Child Support

You cannot have child support or alimony payments discharged in bankruptcy. You are paying child support for the children you had with a partner, and you are paying alimony to a former spouse. It is your obligation to support your children and your spouse for a given period of years, so the court will not relieve you of these responsibilities.

Penalties and Fines

If the government levied fines against you or ordered you to make criminal restitution to an individual, you cannot discharge these debts in bankruptcy. These debts fall under the classification of your “debt to society,” and you cannot be relieved of these debts through bankruptcy.

Condominium or Cooperative Housing Fees

These fees can be discharged in bankruptcy, but this only applies to fees that are owed prior to filing bankruptcy. If these fees accrue after you file for bankruptcy, those fees will not be a part of the discharge. Therefore, if you continue to live in the condominium or coop, association fees will continue to accrue, and you will have the obligation to pay them to the homeowner’s association.

Debts Owed to 401(k) and IRA Retirement Plans

Retirement plans are exempt from being seized by creditors in bankruptcy, so these debts cannot be discharged. Therefore, if you took out a loan on your 401(k) or IRA retirement plan, the court will not discharge this debt in bankruptcy. Several other types of retirement plans fall under this protection, including defined-benefit plans, money purchase plans, profit-sharing plans, Keoghs, SEP and SIMPLE IRAs and 403(b)s.

Plans that do not receive this protection include stock option plans, investment accounts, savings accounts, and bank and investment account funds.

Debts Not Listed

If you do not list a debt when you file for bankruptcy, your creditors cannot review it and file an objection if they feel it is necessary. That is why a debt that you did not list will not be eligible for discharge in bankruptcy. After failing to list this debt, your creditor can continue to pursue you for the collection of that debt. The law requires that you list all debts even if the debt is not eligible for discharge. This ensures that there is transparency in this process and protects the creditor as well.

Do I Have a Right to a Discharge?

No, you do not always have a right to have your debts discharged in a Chapter 7 case. The creditor or the trustee in your case can object, but the U.S. trustee can also disagree with your plan to file for bankruptcy. After filing for bankruptcy, your creditors receive a notice that gives them a date by which they need to object to the discharge.

In a Chapter 13 bankruptcy, you will be entitled to a discharge only after you complete the payments that you agreed to make in your plan. However, you will not be entitled to a discharge if you fail to complete a personal financial management course. If you complete all of your payments according to your plan, your creditors cannot object to the discharge of your debts.