If your business is struggling to keep up with debt payments, filing for bankruptcy could help you regain control over your finances. But to file for bankruptcy, you must be eligible to file in the first place. Chapter 7, Chapter 11, and Chapter 13 bankruptcies are fairly easy for most business owners to qualify for, but there are some circumstances that can make you ineligible.
Familiarizing yourself with the common reasons for disqualification before you schedule a consultation with your Wisconsin business bankruptcy attorney can help you better understand your options. Here’s what you need to know.
Failing the Means Test as a Sole Proprietor
If you’re a sole proprietor, filing for Chapter 7 bankruptcy can get some or all of your debt dismissed. But to qualify for Chapter 7, you’ll need to pass the means test. The means test shows the court that your income is too low to repay your debts and that making any payments would place undue strain on your ability to cover necessities like food, utilities, and shelter. If you have disposable income and fail the means test, you may not be eligible to file for Chapter 7 bankruptcy. Keep in mind that you may still be able to file Chapter 11 or Chapter 13 depending on your business’s structure.
Filing for Bankruptcy Too Often
Bankruptcy is supposed to give you the chance to get your finances back on track. It’s not supposed to be a tool that businesses rely on when finances get tight. That’s why the court has clear timelines in place to prevent the abuse of the system. If you’ve filed for bankruptcy in the past, either as a sole proprietor or a business, you may need to wait to file for bankruptcy again. Your Wisconsin business bankruptcy attorney can help you verify your eligibility if you’ve filed in the past.
Committing Fraud
If you’ve committed acts of fraud when filing for bankruptcy, you’ll be ineligible to file for bankruptcy again. Worse, you may end up facing criminal charges for fraudulent acts. Which can keep you from being able to run your business and may send you to jail. Some common fraudulent acts that can keep you from being able to file for bankruptcy include:
- Bribery
- Submitting false claims
- Hiding business assets
- Lying on essential forms and paperwork
Dismissal of Previous Bankruptcy Case
Bankruptcy cases aren’t guaranteed to discharge your debt or help you enter into a repayment plan with your creditors. The court still needs to review your case and determine if bankruptcy is a viable option for your situation. If the court dismissed a previous bankruptcy case and you’re refiling a year or two after that dismissal, you may be ineligible. Your Wisconsin business bankruptcy attorney will help you understand how that previous dismissal may impact your current situation.
Failure to Complete the Necessary Paperwork
When you file for bankruptcy, you’re expected to complete all necessary paperwork. Missing a form, not filling something out willfully, or forgetting to submit something by a set deadline could make you ineligible to complete the filing process. That’s why it’s always a good idea to work with an experienced Wisconsin business bankruptcy attorney from the very beginning. They’ll make sure you’re submitting all necessary forms on time and as accurately as possible.
Schedule a Consultation Today
If you’re concerned about your eligibility to file for bankruptcy, don’t leave things up to chance. Schedule a consultation with an experienced Wisconsin business bankruptcy attorney at Kerkman & Dunn today. Our team will help you review your financial situation and figure out the best path forward for your business.
