THREE FACTORS TO CONSIDER BEFORE FILING FOR CHAPTER 7

three road signs that say chapter 7

As Americans who are currently unemployed brace for a reduction in their unemployment check, many will look to find other ways to manage their household budget.  Some will use their savings or cut back on expenses even further, while others will undoubtedly need to file bankruptcy.  Those who attempt to file bankruptcy may want to file Chapter 7, but they first must qualify for Chapter 7.  Otherwise, they may be relegated to having to formulate a repayment plan in Chapter 13.

Chapter 7 is the quickest way to eliminate your debt problems and begin to rebuild credit.  In order to take advantage of Chapter 7, there are 3 primary factors to consider:

Do you and your spouse make too much money? What is your total household income?

Unless your debt is primarily business debt, in order to qualify for Chapter 7, you must first pass the Means Test.  The Means Test considers your total household income and your allowable expenses (based on National and Local Standards used by the Internal Revenue Service) to determine whether you have enough disposable income to propose a repayment plan to creditors.  If your income is below the median income level for your county/state, then you will qualify.  If your income is above the median income, you may still qualify, but you may also need to consider Chapter 13.  Talk with your bankruptcy lawyer to see if you pass the Means Test.

Do you stand to lose any assets? How much equity is built up in your house?

If you own a home with a substantial amount of equity or have other assets that could be sold to pay your creditors, you may want to consider filing Chapter 13 or selling those assets and using the money to work out settlements with your creditors.  Most creditors are willing to work with you and will take less than the full balance due in order to settle the debt rather than receiving nothing if you file Chapter 7.

Have you sold or transferred any property in the last year?

If you have sold or transferred property to anyone in the past year, you will need to disclose the details of the transaction in your bankruptcy petition.  If the person who received your property was related to you or if the consideration received was for less than fair market value, the transfer will be scrutinized by the Chapter 7 Trustee and the Bankruptcy Court.  It is possible that you could jeopardize your ability to receive a discharge because of the transfer, so be sure to discuss these transfers with your bankruptcy lawyer before you decide to file a case.

If you are struggling to pay your debts and concerned about the future welfare for you and your family, it is important that you seek the advice of a bankruptcy lawyer to ensure that your assets are protected and the debts you seek to eliminate are dischargeable.  Our attorneys have been assisting consumers and business owners with bankruptcy matters for over 25 years.  If you are considering filing for bankruptcy, please consider contacting the Nomberg Law Firm.  Our office number is 205-882-5005.

Steven D. Altmann has been a lawyer for more than 25 years. Steve has earned an AV rating from Martindale-Hubbell’s peer-review rating and was recently named a Super Lawyer and Top Attorney by Birmingham Magazine in the area of Bankruptcy Law.


We are a Federal Debt Relief Agency. We help people file for bankruptcy relief under the U.S. Bankruptcy Code.

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Steve Altmann has been assisting consumers and business owners with bankruptcy matters for more than 27 years. 

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