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Why were you disqualified for Chapter 7 bankruptcy?

If you filed for Chapter 7 bankruptcy in Virginia and the bankruptcy court converted your case to a Chapter 13 or dismissed it altogether, you may be wondering why. What caused you to become ineligible for liquidation bankruptcy? According to FindLaw, there are several seasons that the bankruptcy courts may have converted or dismissed your case.  

The most common reason that bankruptcy courts deny debtors’ Chapter 7 applications is because their income is too high. This may very well be the case for you. Before approving your application, the courts will put you through a “means test.” The first part of the test requires you to compare your current monthly income with the state’s median income. If your income is equal to or below the state’s current median, you may qualify for Chapter 7. If it is above the state median, the court may deny your application and convert your case to a Chapter 13.

Another reason that the court may dismiss or convert your case is if it recently discharged your debt via a Chapter 7 within the past eight years or via a Chapter 13 within the past six years. The court may also deny your application if it dismissed a Chapter 7 or Chapter 13 case under your name within the past 180 days.

If you failed to meet the credit counseling requirements set forth by bankruptcy law, you may be ineligible for Chapter 7 or Chapter 13. According to the law, you must participate in a credit counseling program with an approved nonprofit agency within 180 days prior to filing Chapter 7. There are few exceptions to this rule, a few of them being mental incapacity, physical disability or your service on active duty in a military combat zone.

Finally, the court may convert or dismiss your Chapter 7 case if it suspects that you have attempted to defraud your creditors. Fraud, in the court’s eyes, can take many forms and may include transferring property to friends or family, purchasing luxury items immediately before filing, mutilating or destroying property or lying about your income.

The information in this post is intended for purely educational purposes. It should not be construed as legal advice.


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