10 Times You Don’t Need To Apply For Bankruptcy


If you are seeking to file for bankruptcy, did it ever occur to you that you may not actually need to file for it? If you consult a good bankruptcy lawyer, he might advise that you are not actually eligible for bankruptcy filing.

But then isn’t it better if you are self aware about this. And you can check for yourself whether you need to file for bankruptcy or not.

Here are those 10 situations, when you don’t need to file for bankruptcy:

  1. Recent filing: If you have filed for bankruptcy under Chapter 7 recently, you may need to wait at least for 6 years before you can file it again.
  2. High Income level: If your debts are not more than the debt limit set by U.S. Bankruptcy code and also if your income level is high you will not need to file for Chapter 7 bankruptcy. However, you may need to file for Chapter 13 bankruptcy.high-income-level
  3. Low Debts: If you have debts like $1000 for payday loan or $2500 lawsuit, you can pay them without interest under Section 128. In this kind of a case where your debts are very low, it is not required for you to file for Chapter 7.
  4. Debts paid to relatives or friends: You may have paid for debts you owed to your relatives or friends. This may not really be called bankruptcy but surely this can involve your relatives or friends also in your bankruptcy.
  5. Property Transfer: If you have transferred your property without consulting with a bankruptcy attorney. It will not entitle you to file for bankruptcy. Again this can also involve the person to whom you transferred the property in your bankruptcy.property-transfer
  6. High Debts: Sometimes if you may have too much debt, then also you will not be eligible to file bankruptcy. For e.g. if you have total unsecured debts more than $360,475, or if your total secured debts are not less than $1,081,400, then you are not eligible to file a Chapter 13. However, these debt constraints don’t apply if you are filing under Chapter 7.
  7. Child Support & Recent Tax Debts: These debts cannot be discharged when you file for Chapter 7 bankruptcy. However they can be paid through Chapter 13 in case you wish so. All these debts must be paid completely within 5 years. If you find a challenge in clearing these debts within this time frame, the Chapter 13 bankruptcy won’t work for you. You should probably consult your attorney and find out other debt relief options in that case.
  8. Many Non-Exempt Assets: In case you have too many non-exempted assets and it is not possible for your attorney to protect them via exemption planning, you should avoid Chapter 7 bankruptcy. If this is the case, then it will be given to a trustee who will liquidate all your assets and pay off your creditors. Such cases are better with Chapter 13. This will protect your assets and they cannot be given to anyone. But you must make sure that you have enough monthly income to make periodic plan payments. In case of large non-exempt assets you can try to go for credit card debt negotiation to settle these debts. You may then again consult your attorney and find out other debt relief options.
  9. Credit score: If you have been having a perfect credit score, and don’t want to damage it in anyway, then maybe you should not go for bankruptcy. You must however note that whatever bankruptcy option you will go for, it will affect your credit score in some way or the other. Also that a Chapter 7 bankruptcy will remain in your reports for 10 years and Chapter 13 for 6 years.
  10. Social Security: Most of the people who go for bankruptcy do not know that the creditors cannot stop your Social Security income. If you have no assets and your only income is Social Security, there is not much to worry here. There is nothing the creditors can take from you. Filing for bankruptcy is not necessary to protect your Social Security income from garnishment. However it can help you to stop creditor harassment.


Hopefully these tips will help you understand bankruptcy better and you will be able to take appropriate action for your future economic situation.