When is a Chapter 7 Bankruptcy not an Option?

There are some people who do not really have bankruptcy as an option despite low income. Some can only benefit from a payment plan provided by a Chapter 13, but they can’t afford the payments. Here’s an outline of people who may not benefit from a bankruptcy. Since everyone is different and there are exceptions to every rule, it’s always best to speak with an attorney when considering bankruptcy.


Prior Bankruptcy Filing:

People who received a Chapter 7 discharge within the last eight years must wait before filing another Chapter 7. The option to file a Chapter 13 bankruptcy may still be available if the person has income and can afford to make monthly payments.


Too Little Unsecured Debt:

People with a very small amount of unsecured debt typically should not file a

Chapter 7 bankruptcy
. Examples of unsecured debt are credit cards, medical bills, deficiency from a repossessed vehicle, and utility bills. It’s usually not worth filing if there’s less than $5,000 in unsecured debt. In a way, it’s wasting the right to file bankruptcy since you have to wait so long before filing another one. Also, people with a very small amount of unsecured debt aren’t as harmed by the creditors as someone with higher debt.


Too Much Equity in Real Estate:

This is often a problem with low income elderly homeowners who have paid off their mortgages. Despite the low income, they risk losing their home in a bankruptcy because the home is worth too much. In Michigan, married couples may still be able to keep their homes even if there is too much equity. There’s a Michigan exemption that can be used by some couples.


Only Non-Dischargeable Unsecured Debt:

Some debt can’t be discharged or canceled in a bankruptcy.

Student loans
,

child support
, most

income taxes
, and certain criminal fines are non-dischargeable. A Chapter 13 payment plan may benefit someone who

only

has non-dischargeable debt, a Chapter 7 will not.

Posted in Chapter 7 Bankruptcy
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