What Is the Good Faith Filing Requirement in Bankruptcy?

The good faith filing requirement in bankruptcy is the unwritten rule that every petition, whether under Chapter 7, 11, or 13, must be a genuine attempt to resolve financial distress rather than a tactical move to block a creditor, delay a foreclosure, or hide assets. No single statute defines it, but courts treat it as a threshold question, and failing it can end the case, block refiling for months, strip the automatic stay, expose the debtor’s attorney to sanctions, and in the worst situations trigger federal criminal charges.

How Courts Decide Whether a Filing Is in Good Faith

The Bankruptcy Code never spells out what good faith means, which is deliberate. Judges apply what most courts call the totality of the circumstances test, looking at the debtor’s financial history, the timing of the filing, the accuracy of the schedules, and the apparent motive behind the petition.¹ A person who lost a job and fell behind on medical bills presents a very different picture than someone who filed on the courthouse steps before a foreclosure sale, omitted a bank account from the schedules, and had two dismissed cases the previous year.

The flexibility is the point. A rigid rule would be easy to game. The discretionary standard lets judges weigh the same behavior differently depending on the surrounding facts, and it lets them focus on the real question: is this filing about resolving debt, or about dodging a specific creditor or lawsuit?

Red Flags That Draw a Bad Faith Motion

Trustees and creditors know the patterns. None of the following is automatically fatal, but a motion that stacks several together rarely needs much argument to succeed.

Filing bankruptcy against a single creditor when the debtor has almost no other debt, which reads as a litigation tactic rather than a financial reset.
Leaving income, bank accounts, or property off the schedules.
Filing multiple petitions in a short window, particularly when each one gets dismissed before completion.
Reporting income or asset figures in the bankruptcy that conflict with a recent loan application or family court filing.
Transferring property to relatives or converting large amounts of cash into exempt assets in the weeks before filing.

Good Faith Under Each Chapter

Chapter 7 and the Presumption of Abuse

Chapter 7 wipes out qualifying debts quickly, so Congress built in a screen. When a debtor’s income is high enough relative to their debts, the court presumes the filing is abusive.² The means test calculates the debtor’s current monthly income, subtracts allowed expenses drawn from IRS national and local standards published by the U.S. Trustee Program, and projects what the debtor could pay over 60 months. If that figure crosses the statutory threshold, the presumption kicks in. Those dollar thresholds were last adjusted effective April 1, 2025.³

The presumption can be rebutted with evidence of special circumstances such as a serious medical condition or a call to active military duty. Without a convincing rebuttal, the U.S. Trustee or any party in interest can move to dismiss or convert the case to Chapter 13. Even when the means test comes out clean, the court can still dismiss a Chapter 7 case if the totality of the circumstances shows abuse or bad faith. The means test is a floor, not a ceiling.

Chapter 13: Two Separate Good Faith Tests

Chapter 13 imposes the requirement twice. The petition itself must be filed in good faith, and the repayment plan must be proposed in good faith.⁴ Fail either one and the court cannot confirm the plan, which effectively ends the case.

The plan inquiry asks whether the debtor is committing actual disposable income to creditors over the three-to-five-year repayment period, or shielding a comfortable lifestyle at creditors’ expense.⁵ Someone earning $8,000 a month who proposes paying $200 while keeping two car payments and a country club membership will struggle at confirmation. The petition inquiry looks backward at conduct before filing: last-minute luxury purchases, transfers to family, or a recently denied Chapter 7 discharge can all sink the case before the plan is even reviewed.

A creditor or the U.S. Trustee can also move to convert a Chapter 13 case to Chapter 7 or dismiss it for cause. The statute lists more than a dozen grounds, including unreasonable delay harmful to creditors, failure to make plan payments, and defaulting on a confirmed plan.⁶

Chapter 11 and New Debtor Syndrome

The Code doesn’t explicitly demand good faith for a Chapter 11 filing, but courts have consistently held that the power to dismiss “for cause” reaches bad faith cases.⁷ The pattern courts see most often is sometimes called new debtor syndrome: a person creates a single-asset entity, transfers property into it, and files Chapter 11 right before a foreclosure sale. When the entity has no employees, no revenue, no ongoing business, and no realistic path to reorganization, courts dismiss the case as a bad faith use of the reorganization chapter.

Pre-Filing Asset Moves: Where Planning Ends and Manipulation Begins

Converting nonexempt assets into exempt ones before filing is legal. Paying down a car loan, contributing to a retirement account, or buying tools of the trade are routine attorney recommendations. Trouble starts when the scale, timing, or history of the transaction suggests the point was to cheat creditors.

Timing matters. Paying off a car six months before filing looks different than doing it the day before.
Scale matters. Modest transactions survive scrutiny; dumping $200,000 into a homestead the week before filing does not.
Historical pattern matters. Years of steady retirement contributions look nothing like a first-ever lump sum right before filing.
Intent is the underlying question in every case.

Trustees have two federal tools to undo problematic moves. Under the fraudulent transfer statute, a trustee can claw back any transfer made within two years before filing if the debtor intended to defraud creditors or received less than fair value while insolvent.⁸ If a debtor transferred or concealed property with fraudulent intent within one year before filing, the court can deny the Chapter 7 discharge entirely, meaning the debtor completes the whole process and gets no debt relief.⁹ State fraudulent transfer laws often reach back four years or more.

Serial Filers Lose the Automatic Stay

The automatic stay halts foreclosures, garnishments, lawsuits, and collection calls the moment a case is filed. Congress built in escalating penalties for anyone abusing it.

If a debtor files a new case within one year of having a prior case dismissed, the automatic stay expires after 30 days unless the debtor files a motion, holds a hearing within that window, and proves good faith.¹⁰ The court presumes the new filing is not in good faith if the debtor had more than one prior case dismissed in the past year, the earlier case was dismissed for failure to follow court orders or make plan payments, or the debtor’s financial situation hasn’t materially changed. Overcoming that presumption requires clear and convincing evidence.

Two or more dismissals in the prior year escalates the penalty further: no automatic stay at all when the new case is filed. The debtor has to affirmatively ask the court to impose one, and the same presumption of bad faith applies. Foreclosures and garnishments continue on day one as if no bankruptcy had been filed.

The Credit Counseling Prerequisite

Before filing, most debtors must complete a credit counseling briefing from an approved nonprofit within 180 days of the petition date.¹¹ Skipping it makes the debtor ineligible, and the court will dismiss the case regardless of the merits. The briefing typically costs between $10 and $50 and can be completed online or by phone. Narrow exceptions exist for exigent circumstances, incapacity, and active duty in a combat zone.

What Happens When the Court Finds Bad Faith

Dismissal and Refiling Bars

A basic dismissal ends the case and lifts the stay, and the debtor is generally free to try again later when circumstances genuinely change.¹² A tougher outcome is a 180-day refiling bar, which applies when the case was dismissed for willful disobedience of court orders or failure to appear, or when the debtor voluntarily dismissed after a creditor had already moved for stay relief.¹¹ During those 180 days, the debtor has no access to bankruptcy protection at all. Longer bars are possible in egregious cases.

Attorney Sanctions

Attorneys who sign a petition personally certify that they investigated the facts and that the filing is well-grounded. If the court dismisses a case as abusive and finds the attorney breached that duty, it can order reimbursement of the trustee’s costs and fees and impose a separate civil penalty.¹

Criminal Prosecution

Concealing assets, making false statements under oath, or presenting fraudulent claims in a bankruptcy case is a federal crime carrying up to five years in prison and fines.¹³ Prosecutors don’t pursue every minor omission, but cases involving large hidden assets, fabricated documents, or systematic fraud do get referred by the U.S. Trustee’s office to the Department of Justice.

Bad Faith by Creditors

The duty runs both directions. Creditors can force a debtor into bankruptcy with an involuntary petition, but if the case is dismissed and the court finds the creditor filed in bad faith, the debtor can recover costs, reasonable attorney’s fees, compensatory damages, and punitive damages.¹⁴ Courts examine whether the petition had merit, whether the creditor investigated before filing, whether the timing was suspicious, and whether the real motive was to harass or gain leverage in separate litigation. Punitive awards in these cases can be substantial.

1
Office of the Law Revision Counsel. 11 USC 707 – Dismissal of a Case or Conversion to a Case Under Chapter 11 or 13
2
Office of the Law Revision Counsel. 11 USC 707 – Dismissal of a Case or Conversion to a Case Under Chapter 11 or 13
3
U.S. Department of Justice. Means Testing
4
Office of the Law Revision Counsel. 11 USC 1325 – Confirmation of Plan
5
United States Courts. Chapter 13 – Bankruptcy Basics
6
Office of the Law Revision Counsel. 11 USC 1307 – Conversion or Dismissal
7
Office of the Law Revision Counsel. 11 USC 1112 – Conversion or Dismissal
8
Office of the Law Revision Counsel. 11 USC 548 – Fraudulent Transfers and Obligations
9
Office of the Law Revision Counsel. 11 USC 727 – Discharge
10
Office of the Law Revision Counsel. 11 USC 362 – Automatic Stay
11
Office of the Law Revision Counsel. 11 USC 109 – Who May Be a Debtor
12
Office of the Law Revision Counsel. 11 USC 349 – Effect of Dismissal
13
Office of the Law Revision Counsel. 18 USC 152 – Concealment of Assets, False Oaths and Claims, Bribery
14
Office of the Law Revision Counsel. 11 USC 303 – Involuntary Cases