Should I file for Chapter 7 bankruptcy?

There are three types of people. There are people who should file for Chapter 7 bankruptcy right now. There are people who should wait a little bit of time and then file for Chapter 7 bankruptcy. And then there are people who should not file for Chapter 7 bankruptcy.

First, let’s talk about people who should not file for Chapter 7 bankruptcy. You should not file for Chapter 7 bankruptcy if the following apply to you:

  • You have less than $10,000 in debt. People who have less than $10,000 in debt should probably try to pay off the debt that they have or they should wait until they have more debt before filing for bankruptcy. You don’t want to waste the opportunity you have to file for Chapter 7 bankruptcy if you don’t have that much debt.
  • You want to erase your student loan debts. Most people are unable to erase their student loans in Chapter 7 bankruptcy.
  • You want to erase money that you owe for taxes you haven’t paid. Most people are unable to erase their tax debt unless the tax debt is older than 3 years.
  • You want to erase debt you owe from judgments against you because of illegal things like driving while drunk. You cannot erase this debt.
  • You want to erase debt you owe for child support or alimony that you haven’t paid. You cannot erase this debt.
  • You successfully filed for bankruptcy in the last 8 years. You can only erase your debt in a Chapter 7 case once every 8 years.
  • You earn above the median income for your state. You can find out if you earn above the median income from your state by going here.
  • You have expensive property that the court will not let you keep. To figure out what type of property the court will let you keep, please see our help page here. Depending on the state, if you own an expensive home or car, or something else that costs a lot, you will not be able to keep it after your bankruptcy. The court will take it, sell it, and give the money away to the people to whom you owe money. Remember, the court usually isn’t interested in taking away your clothes, furniture, or other personal belongings. The court would not get very much money for these if it sells them.

Here are some reasons you should file for Chapter 7 bankruptcy:

  • You have over $10,000 in debt from credit cards, medical bills, money you owe friends or family, or judgments against you, and you don’t think that you’ll pay back this debt in the next 5 years.
  • You have less than a 600 credit score.
  • You do not own expensive property that the court would take away. This includes an expensive house, car, or other goods. Check out whether you’ll be able to keep you property here. Almost all people who own less than $15,000 worth of things keep all their property.

Here are some reasons you should wait if you think Chapter 7 bankruptcy is a good fit for you:

  • You want to erase debt from a large purchase you made in the last 6 months. The court will think that you’re filing for bankruptcy just to get out of a debt that you recently got, and your bankruptcy case is less likely to be successful.
  • You transferred expensive property to a friend or family member in the last year. You owe your current landlord a lot of money and you want to stay in your current apartment or house. If you file for bankruptcy and erase your back rent, your landlord may evict you. You should probably try to pay back your landlord before you file for bankruptcy, so that you can avoid the risk of being evicted.
  • You think you may fall into more debt in the next few months or years. It’s only a good idea to file for Chapter 7 bankruptcy if you think that you’re going to be in a better financial situation after your bankruptcy. If you think that your financial situation is going to become worse off, you should wait to file, so that you can erase the debt that you’re going to get.
  • You were recently injured and you’re suing someone or plan to sue someone. If you win your lawsuit, the court may take this money away from you and give it to the people you owe. So you should only file for bankruptcy after you know how your case turns out.

Upsolve is a 501(c)(3) legal aid nonprofit that started in 2016. Our mission is to help low-income Americans in financial distress get a fresh start through Chapter 7 bankruptcy at no cost. We do this by combining the power of technology with pro bono attorneys. Spun out of Harvard Law School, our team includes lawyers, engineers, and judges. We have mission-driven funders that include the U.S. government, former Google CEO Eric Schmidt, and private charities.

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