Plan Ahead: How To Avoid Being Barred From Filing For Bankruptcy

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If you are thinking of filing for bankruptcy, you likely already know that this is an option of last resort for those in dire financial circumstances. Creditors may be driving you crazy with constant phone calls and you may even be in danger of losing your home and car. While you very likely have given this decision careful consideration, you should know that there could be issues standing in the way of your filling. Read on to learn more about 2 major stumbling blocks to filing for bankruptcy and how to overcome them.

Income Too High

The bankruptcy codes have guidelines in place that prevents high-earners from declaring chapter 7 bankruptcy. You may have heard of certain well-off people declaring bankruptcy, but income limits vary with the type of bankruptcy (the "chapter") being used and whether or not the bankruptcy was actually for a business and not an individual bankruptcy. For example, chapter 13 bankruptcy is more of a debt reorganization plan, and there are plans available for any income level.

For those who know they want to file a chapter 7, you must pass the "means" test, in which your income must be no more than your state's median income. If your income is too high, don't worry, you may still be able to file a chapter 7. Part of the means test allows you to subtract certain expenses that could bring your income down enough to qualify. If your expenses for items like health insurance, taxes, car loans, mortgages, and more are large enough, you can still qualify for a chapter 7 bankruptcy.

Filing singly instead of jointly, and thus leaving your spouse's income out of the equation, may not work. You must include that income on the means test, but you may be able to use the Marital Adjustment Deduction to reduce some of the spouse's income. If you are separated and living separately, you may file singly without including your spouses income.

Too Soon for Another Bankruptcy

Multiple bankruptcies are possible, but there are time limits on filing. For example, you must wait at least 8 years (from the discharge date, not the filing date) to file another chapter 7 bankruptcy. You can file another chapter 13 bankruptcy in as little as 6 years. Keep your bankruptcy discharge dates in mind since you may need to tough it out a few more months to be able to file another case. Even if your case ended up being dismissed, you must wait for at least 180 days to file again. Dismissals can occur for a number of reasons, such as failing to undergo the required education classes and a non-appearance at the creditor's meeting.

Make sure to speak with your bankruptcy attorney for more information about these potential stumbling blocks to filing, and get started on your fresh beginning.