2.6 ELIGIBILITY OF DEBTOR
2.601 In General. A debtor must be eligible, or must qualify, to be a debtor in bankruptcy. 132 In the bankruptcy petition, the debtor must elect the chapter of bankruptcy under which he or she is filing. If the debtor is not eligible for the chapter elected, the case may be dismissed. Before filing a bankruptcy petition, the preparer should check on PACER 133 and in other bankruptcy court sources to determine whether the debtor has filed a prior petition and, if so, whether and when the debtor was granted a discharge.
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A. Considerations to Determine Eligibility. For individual debtors, the first step is to review whether the debtor has filed a prior bankruptcy and determine whether he or she was barred or restricted from filing a new case or had received a discharge and is ineligible for another discharge for a period of time. The next step is to consider whether the debtor has completed, within the previous 180 days, a pre-petition credit counseling briefing from an approved provider. Additionally, it is important to review the results of the means test plus all sources of income to learn whether filing under Chapter 7 is presumed an abuse or would be determined an abuse as bad faith or based on the totality of the circumstances because that individual has income sufficient to pay creditors.
B. Considerations in Selecting the Chapter. If the debtor is eligible for two or more chapters, it is important to consider which chapter provides the best mechanism to meet the individual debtor's needs and fiscal abilities. For non-consumer debtors, chapter selection is based on a goal to reorganize and continue to operate or to liquidate and close.
The choice of chapter should take into account many factors, including: the debtor's pre-petition conduct, types of debts, leases and executory contracts, types of assets, stability of income and expenses, need for flexibility, need to cure defaults or modify debts, personal preferences, availability of discharge, and need for a stay or co-debtor stay among others. The specific criteria for eligibility under each chapter are explained in more detail below.
2.602 Briefing with Budget and Credit Counseling Entity. An individual debtor must complete a briefing with an approved nonprofit budget and credit counseling entity within 180 days of filing the petition. 134 The briefing must outline opportunities to obtain credit counseling and assist the debtor to perform a related budget analysis. This mandated session can be done in person, over the phone, or on the Internet. The court can grant a debtor an exemption from this requirement based on exigent circumstances if the debtor has requested a session but the request has gone unfulfilled for seven days or more. This "exemption" is really an extension of time that expires 30 days after the filing of the petition, during which time the debtor must participate in the briefing. The briefing is not required for debtors who
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have been found by the court to be mentally incapacitated, physically disabled, or on active military duty in a combat zone. 135
2.603 Section 109(g) Limitations on Eligibility. Section 109(g) contains additional limitations on debtor eligibility. An individual may not be a debtor if he or she was a debtor in the preceding 180 days and the prior case was dismissed by the court for willful failure of the debtor to properly appear before the court or abide by its orders. Likewise, a debtor is ineligible if, in the prior case, he or she requested and obtained a voluntary dismissal after a request for relief from the automatic stay was filed. 136 Section 349 of the Code allows a bankruptcy court to limit or condition a dismissal order to provide that the dismissal be with prejudice for a period longer than that set forth in section 109(g) or for grounds different from those provided in section 109(g). 137 Section 349 further allows a bankruptcy judge to bar the refiling of petitions under specific chapters or any chapter.
2.604 Chapter 7. 138 Section 109(b) of the Code provides that a person may be a debtor under Chapter 7 only if the person is not a railroad, a domestic or foreign insurance company, bank, savings bank, cooperative bank, savings and loan association, building and loan association, homestead association, a New Markets Venture Capital company, a small business investment company, credit union, industrial bank, or similar entity that is an FDIC-insured institution. A person includes a human being as well as a corporation, partnership, or other legal entity.
Although an individual may qualify to be a debtor under the definition set forth in section 109(b), the individual may not qualify for a discharge of his or her debts under Chapter 7 if he or she was granted a discharge under Chapter 7 or Chapter 11 in a case commenced within eight years before the date the petition was filed. 139 Similarly, a debtor may not qualify for a discharge under Chapter 7 if the debtor was granted a discharge...
