Anybody in debt must be aware of the many alternatives to bankruptcy, especially if they plan on filing Chapter 7 bankruptcy. We will discuss when it is best to avoid Chapter 7.
Most assets are sold to pay off debts in a Chapter 7 filing. It is sometimes a good idea to exhaust all bankruptcy options (explained further below) before you go down this route. Do not file if you made fraudulent charges on your credit card
If someone files bankruptcy, creditors may object to the removal of your debt. This includes:
- False information in a credit card application
- Spending money without the intention to repay it
- When evaluating fraud, a bankruptcy court will take into account the following:
- Between credit card charges and bankruptcy filing
- Recent luxury purchases exceeding $500
- Recent withdrawal of large cash advances
- Multiple charges on the same day
- Your employment status
- A sudden shift in purchasing habits
Financial situation at the time charges were assessed (e.g., could you afford the minimum monthly payment).
To object to a discharge of a debt, a creditor must file a request to the bankruptcy court. The court can discharge the debt if the creditor fails or is not able to file this request. Do not file if you have received a recent, previous bankruptcy discharge
If you have received:
- Chapter 7 bankruptcy discharge within eight years
- Chapter 13 bankruptcy discharge within six years
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It is possible to file another bankruptcy petition in certain situations. If you believe that filing again is the best option, consult a bankruptcy attorney. Do not file if a previous (recent) bankruptcy case was dismissed
A Chapter 7 or Chapter 13 case that was filed within the past 180 days was dismissed by the court
- Because of a violation by a court order, the case was dismissed
- After a creditor requested that the court lift an automatic stay, you asked for a dismissal
- Do not file if: You will survive bankruptcy if you have too many debts
Some Chapter 7 debts can survive bankruptcy discharge. You are still liable for these debts. You should consider other options if your debt is mostly made up of non-dischargeable obligations.
These types of debts can outlive Chapter 7 bankruptcy.
- Child support payments
- Alimony (spousal support)
- Taxes that are less than three years old
- Student loans
- Judgements for drunk driving accidents in auto accidents
- Taxes on trust funds
- Restitution or criminal fines
- For the payment of back taxes, there are debts
If a creditor challenges Chapter 7, bankruptcy, the following debts could survive:
- Willful and malicious injury to property or person can lead to debt
- Debt resulting from a breach in a fiduciary obligation
- Debt due to embezzlement
- Purchase of luxury items requires debt
- Fraud-related debt
- Don’t File If: You Might Lose Valuable Property
It is important that you know the maximum property you are allowed to keep in Chapter 7 bankruptcy. Chapter 7 will allow the bankruptcy trustee to sell non-exempt property in order to pay creditors.
If you are going to lose property you want to keep, you may file for Chapter 13 or another debt relief option.
- You can keep exempt property in most states.
- Equity in a house or motor vehicle that has a certain amount
- Needful and affordable clothing
- Jewelry less than a specified amount
- Life insurance up to a certain value
- Tools to a trade or profession
Public benefits such as welfare, unemployment benefits and Social Security benefits include benefits like welfare.
Appliances for the home
- Other retirement accounts, such as 401(k),
- The following property is not exempt from trustee control in most states:
- Equipment that is expensive
- Stamp collections
- Family heirlooms
- Bank accounts
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Boats and planes
You may be able to keep some non-exempt property in many cases by:
- Exempt property equal in value can be exchanged for non-exempt property
- You can sometimes keep non-exempt property, if the trustee determines its value is not sufficient to justify selling it.