What Disqualifies You from Filing Bankruptcy

The Means Test: Income Limits That Block Chapter 7

The means test compares your household income against your state's median. If you earn more than the median, you face additional calculations that factor in allowed expenses for housing, transportation, and secured debts. Fail these calculations and Chapter 7 becomes unavailable to you.

Here is what surprises most people: the test uses your average income from the past six months, not your current paycheck. Lost your job last month? Your income from months one through five still counts. This timing quirk disqualifies people who recently became unemployed but had steady income earlier in the year.

California median income for a household of four sits at $117,715 annually in 2025. Texas comes in at $91,927. Mississippi has the lowest at $63,428. These numbers update twice yearly.

Passing Despite High Income

Above-median earners can still qualify through the second part of the test. You subtract allowed expenses from your income. Mortgage payments, car loans, child support obligations, and IRS-approved living expenses all reduce your calculated disposable income. If the final number falls below $234.17 per month, you pass.

Prior Bankruptcy Filings Create Mandatory Waiting Periods

The bankruptcy code prohibits serial filings through strict time bars. Got a Chapter 7 discharge? You wait 8 years before filing another Chapter 7. The clock starts from your original filing date, not your discharge date. Most people miscalculate this.

Chapter 13 has different rules. After a Chapter 7 discharge, you can file Chapter 13 in just 4 years. After a Chapter 13 discharge, another Chapter 13 requires only 2 years. These shorter windows exist because Chapter 13 involves repayment rather than liquidation.

Missing Credit Counseling Certification

Federal law requires completion of an approved credit counseling course within 180 days before filing bankruptcy. No certificate, no filing. Courts dismiss petitions immediately when this document is missing.

The course takes 60 to 90 minutes. Cost runs between $15 and $50 through approved agencies. You can complete it online, by phone, or in person. The Department of Justice maintains an approved provider list at justice.gov.

Fraud and Bad Faith Bars to Filing

Courts can deny discharge to anyone who committed fraud in connection with the bankruptcy case. This includes hiding assets, lying on schedules, destroying records, or transferring property to friends and family before filing.

Timing matters for transfers. Moving assets within two years of filing raises red flags. Transferring your paid-off car to your brother six months before bankruptcy? The trustee can reverse that transfer and sell the vehicle. Worse, you might face criminal charges.

Running up credit card balances right before filing screams fraud. Luxury purchases over $725 within 90 days of filing are presumed non-dischargeable. Cash advances over $1,000 within 70 days face the same presumption.

What to Do When You Cannot File Bankruptcy

Disqualification from one chapter does not mean total exclusion from debt relief. Failed the means test? Chapter 13 remains open. Hit the Chapter 13 debt ceiling? Chapter 11 works. Timing violation? Wait it out while using state law exemptions to protect assets from creditors.

Some people discover they are judgment proof. If you have no wages to garnish, no bank accounts to levy, and no property to seize, creditors cannot collect even with a court judgment. Social Security income enjoys strong protection from garnishment.

Debt settlement becomes viable when bankruptcy is blocked. Creditors know they cannot squeeze blood from a stone. Settling $50,000 in credit card debt for $15,000 happens regularly when the alternative is collecting nothing through legal action.

"Most disqualifications are preventable if you know what triggers them. An experienced attorney spots disqualifying factors in minutes." — Jeffy Goetz, Bankruptcy Attorney

FAQ

Can I file bankruptcy if I make over $100,000 per year?
Yes, high income does not automatically disqualify you. The means test considers household size, state median income, and allowable deductions. Many six-figure earners qualify for Chapter 7 after subtracting mortgage payments, car loans, and other allowed expenses.

What happens if I file bankruptcy and get disqualified later?
The court dismisses your case without discharge. You lose filing fees (typically $338 for Chapter 7) and attorney costs. Creditors can resume collection immediately.

Does owning a home disqualify me from Chapter 7?
No, homeownership alone does not disqualify anyone. State exemptions protect home equity up to specific limits. California allows up to $300,000 in protected equity. Texas and Florida have unlimited homestead exemptions.

Can student loans disqualify me from bankruptcy?
Student loans do not affect eligibility to file. They simply survive the discharge in most cases. You can still file bankruptcy to eliminate credit cards, medical bills, and other debts.

How long do I wait after dismissal to refile bankruptcy?
No mandatory waiting period exists after dismissal since no discharge occurred. However, filing within 180 days of dismissal due to willful failure to comply with court orders can bar your new filing.

Can I file bankruptcy twice in my lifetime?
Yes, no lifetime limit exists on bankruptcy filings. The only restriction involves waiting periods between discharges of 2 to 8 years depending on chapter combinations.