Before deciding to use Chapter 7 bankruptcy, it’s wise to consider the situations in which a person is deemed ineligible to use this option to discharge one’s debt. In some cases, while you may be ineligible right now, you may become eligible again in the future, so understanding your position can help you know how and when to file.
First off, if you used Chapter 7 bankruptcy in the last eight years, and a debt was discharged, you are ineligible. It is possible to use Chapter 7 multiple times, but you have to observe this waiting period.
There is also a similar waiting period if you’ve used Chapter 13 bankruptcy, though it is shorter. You’re ineligible if you’ve used it in the last six years.
You may also be ineligible for Chapter 7 if you actually qualify for Chapter 13. This is determined based on your debt, expenses and income. If you can use Chapter 13 — which creates a repayment plan so that your debt is affordable, rather than eliminating it — you may be told to use it rather than the liquidation option of Chapter 7.
Finally, you may be ineligible for not following the rules of the bankruptcy court. This could include skipping out on mandatory credit counseling, trying to defraud the court, or trying to defraud the creditors to whom you owe money.
The bankruptcy process is very well defined in Washington and the set rules must be followed in order to successfully eliminate debt. Be sure you understand your legal position and what must be done to take back control over your finances.
Source: FIndLaw, “Chapter 7 Bankruptcy Rules Overview,” accessed Sep. 23, 2016