Filing Chapter 7 Bankruptcy


Filing Chapter 7 bankruptcy has several requirements that have to be met. A Chapter 7 bankruptcy is the preferred consumer bankruptcy because of its ability to completely wipe out most unsecured debt. As such, bankruptcy law is designed to protect it from being abused by serial filers.

When filing a Chapter 7 bankruptcy, the Court takes several factors into consideration such as the debtor’s income level, the type of debt incurred, as well as the amount of property you own.

Filing Chapter 7 Bankruptcy – Income Level

When you file for a Chapter 7 bankruptcy, you have to prove to the Court that you do not have sufficient funds to repay outstanding debt. Bankruptcy law requires Chapter 7 bankruptcy filers undergo the Means Test. The Means Test measures your average income for the past six months prior to filing your case against that of the average median income for the state in which you reside. If your average income is less to or equal to the state’s average median income, then filing a Chapter 7 bankruptcy is an option. However, if you earn more than the average median income, then you will be required to undergo additional parts of the Means Test to determine your eligibility to file a Chapter 13 bankruptcy.

Filing Chapter 7 Bankruptcy – Type of Debt

As mentioned before, a Chapter 7 bankruptcy eliminates unsecured debt. If the vast majority of your debt is secured debt, then a Chapter 13 bankruptcy may be a better option for you. Secured debt is any debt incurred with collateral. Car loans or mortgages are examples of secured debt. Unsecured debts include credit card debt, medical bills and utility bills. Your attorney will help you differentiate between secured and unsecured debt.

Filing Chapter 7 Bankruptcy – The Amount of Property You Own

When considering a Chapter 7 bankruptcy, it is important to let your attorney know if you own valuable property, as it may be at risk of being seized by the Trustee and sold off to pay creditors. However, bankruptcy law has a provision referred to as exemptions that safeguard certain assets – after all, filing bankruptcy should not leave you in a worse situation than you were prior to filing your case. Bankruptcy exemptions vary from state to state, so it is important to inquire about protecting your property.

Filing Chapter 7 Bankruptcy – How Many Times You Can File

Unless ordered by a bankruptcy court, you may file bankruptcy as many times as you wish. However, if you received a discharge on previous filing, there are certain time restrictions. Whether you may file a bankruptcy and receive a discharge depends on:

  • When you filed the previous case
  • Which Chapter you filed in previously and which one you currently wish to file.
  • Whether your previous case was discharged, dismissed or discharged with prejudice.

It is essential to keep in mind that each person’s financial situation is unique, so before ruling out filing Chapter 7 bankruptcy, schedule a free consultation with one of our experienced Chapter 7 bankruptcy attorneys.