Bankruptcy Players: the Debtor
Who Can File for Bankruptcy?
THE
debtor (you)
The Debtor Is the Person Who Files a Case Under the Bankruptcy Code
Once you file your bankruptcy case you will become one of the bankruptcy players: the “debtor.”
However, you have to qualify to become a debtor.
Once you qualify to be a debtor, you have to qualify to file under your preferred bankruptcy chapter.
There are requirements to becoming a debtor under the Bankruptcy Code
The prerequisites for a person to become a debtor (i.e. to file a bankruptcy case) are few and are as follows:
First, you must:
- reside in the United States; or
- have a domicile in the United States; or
- have a place of business in the United States; or
- own property in the United States
And, you must:
- complete a credit counseling course
Some Exceptions Even If You Qualify to Become a Debtor
Even if you qualify to be a debtor, you can be barred from filing a bankruptcy case for 180 days or more.
All of these exceptions are related to a prior bankruptcy case, but usually to multiple prior bankruptcy cases.
You can be barred from filing a case “for cause”
The bankruptcy court can use its inherent powers to bar you from filing a bankruptcy case for a limited period of time or even permanently “for cause.”
The court can do this on its own or by request of another party — usually the trustee or a creditor.
For cause generally means for abusing the bankruptcy system in some way.
Probably to most common abuse of the bankruptcy system is filing multiple bankruptcy cases all of which are dismissed.
The Bankruptcy Code specifically provides that you can’t become a debtor for 180 days from the dismissal of your prior case if the court dismissed the prior case for your willful failure to follow court orders.
The Bankruptcy Code also specifically provides that you may be barred from becoming a debtor for 180 days from the dismissal of your prior bankruptcy case if the following elements are satisfied:
- you filed a prior case
- a creditor filed a motion asking for relief from the automatic stay
- you subsequently filed a motion asking the court to dismiss your case (i.e. asking for a voluntary dismissal)
- and the court granted your motion and dismissed your case
If the above elements are satisfied you may be barred for 180 day from filing another case — regardless of the bankruptcy chapter.
However, the Bankruptcy Code is not clear if this bar is automatic or needs to be enforced by a creditor or by the bankruptcy judge.
There are also requirements to becoming a debtor under a particular bankruptcy chapter (i.e. chapter 7 or chapter 13)
Each bankruptcy chapter has its own eligibility criteria.
Accordingly, to become a debtor under chapter 7 or chapter 13 you must satisfy that respective chapter’s eligibility requirements discussed below.
Additional Requirements to File Under Chapter 7
To file under chapter 7 you must pass the Means Test.
If you pass the means test, you must still satisfy the “totality of circumstances” test and the “good faith” test.
These tests attempt to prevent your “abuse” of the bankruptcy system.
Additional Requirements to File Under Chapter 13
To file under chapter 13 you must:
- have a regular source of income;
- not exceed a total balance of $394,725.00 in unsecured debts on the day of filing; and
- not exceed a total balance of $1,184,200.00 in secured debts on the day of filing.
There are additional requirements for a successful chapter 13 case beyond what is discussed here.