The short answer is to call me or another experienced Cleveland-area bankruptcy attorney, who should be able to answer your Chapter 7 questions quickly and accurately after a few quick questions. That being said, here are the most common things that prevent people from being able to file a Chapter 7:
1. You make too much money to file a Chapter 7 bankruptcy
Chapter 7 is intended to help low-income people, not people who have gotten into debt despite high incomes. The income cutoff is determined by the average income for your state, a figure that is recalculated from time to time. Keep in mind that just because you exceed the Chapter 7 bankruptcy income cutoff, that does not necessarily mean that you cannot file a Chapter 7 bankruptcy. It just means that your case becomes more complicated and the court will need to look at your expenses and other financial information to determine whether you qualify.
As of 12/31/2012, the cutoffs for Ohio are as follows:
1 person household cutoff = $41,946
2 person household cutoff = $52,139
3 person household cutoff = $59,724
4 person household cutoff = $72,764
The cutoff goes up an additional $7,500 thereafter for each additional member of the household.
If your income exceeds these levels, you still might be able to file a Chapter 7 bankruptcy, but it is more difficult. You will need to show that certain expenses, such as your mortgage, car payment, certain child care expenses, etc., are higher than average and leave you so little money left over at the end of the month that you are unable to repay your debts, even partially. You are not allowed to count all types of expenses in this analysis and the calculations are very technical. For more information about these income and expense calculations, see my blog post "What is the means test?"
2. You have filed bankruptcy in the last 8 years
You are only permitted to file Chapter 7 bankruptcy once every 8 years. If you get into debt problems during the 8-year period you either have to file a Chapter 13 bankruptcy, if you qualify for it, or find some kind of non-bankruptcy solution.
3. You have valuable property that will be seized if you file a Chapter 7 bankruptcy
A lot of my clients technically qualify for Chapter 7 bankruptcy but decide not to file because it would cause the court to seize some of their property. The rules about what kinds of property can be seized are complex but summarize them here: The most common types of property seized by the court include houses, cars and portions of tax refunds for the following year. In addition, it is fairly common for whole life insurance policies, stocks and bonds, certificates of deposit, upcoming sales commissions, proceeds from divorce or personal injury lawsuits, and other types of assets to be seized by the court. After the court seizes the assets they are sold and paid out to creditors according to very specific rules.
Losing property as part of a Chapter 7 bankruptcy isn't always the end of the world. I have had dozens of clients decide that they don't care about their house or their car anymore as long as they can can eliminate their debts. I have also had clients work with the court to negotiate payment arrangements that allow them to keep property in a Chapter 7 bankruptcy that would otherwise be seized. The important thing to know is that I analyze all of my clients cases ahead of time and let them know what to expect when they go into court. If they are not comfortable with that, then we find another solutions besides Chapter 7 bankruptcy.