Why Might a Chapter 7 Bankruptcy Not Be Right for Me?

For most people, the decision as to which chapter of bankruptcy to file comes down to choosing between a Chapter 7 and a Chapter 13 bankruptcy. Chapter 7 is generally the preferable chapter because it takes four to five months to get finished. Whereas, a Chapter 13 takes three to five years. In a Chapter 13, you have to make payments and in a Chapter 7 you do not. Additionally, a Chapter 7 is generally cheaper. We are usually trying to figure out if a Chapter 7 bankruptcy will work for you. However, there are four reasons why it might not work for you.

The first reason is that you cannot file a Chapter 7 bankruptcy if you have already filed one and had your debt discharged in the last eight years.

The second reason you might not want to do a Chapter 7 bankruptcy is if you have a lot of property that is going to get seized in a Chapter 7. The idea behind a Chapter 7 bankruptcy is that the trustee, who gets appointed to represent your creditors, seizes any non-exempt property that you have. Most property that people have is exempt, meaning the trustee cannot take it. In most cases, there is not enough non-exempt property for the trustee to bother seizing anything. However, occasionally people have substantial non-exempt property.

The third reason you might not want to do a Chapter 7, or may not be able to do a Chapter 7, is if you earn too much. There is an income cap for a Chapter 7 bankruptcy. It is based on household size and the median income in the state of Colorado. You would have to make sure that you do not earn too much money to do a Chapter 7. However, the income cap is relatively high. People often think they won’t qualify, when in fact they do.

The fourth and final reason you might not want to do a Chapter 7 is if you have certain debts that can’t be discharged in a Chapter 7 bankruptcy. Certain debts such as back taxes, in certain circumstances, student loans, criminal fines and restitution, child support and alimony, debts you were ordered to pay in a divorce, or judgements against you related to driving under the influence of alcohol or drugs will not be dischargeable.