Ineligible Debts

• Before 2005, it was a lot easier to eliminate or at least reduce certain types of debts, notes the book "How to File for Chapter 7 Bankruptcy." But since 2005, such debts as back tax bills less than three years old, child support, alimony and most federal student loans are ineligible for any type of bankruptcy assistance. Some of these policies were instituted due to some people's choices to spend their money on non-essential items and then seek bankruptcy protection.
  
  

Income Qualification

• Those wishing to request debt forgiveness under Chapter 7 of the U.S. bankruptcy code must meet low-income guidelines. The usual standard of measure is whether the filer makes less than his state's annual median income level. Those who earn more money can only qualify for Chapter 7 if they complete a federally-devised means testing formula that proves they cannot even partially repay their debts while supporting their households. The median income range varies according to state of residence and household size. The annual figure for a single Alabama resident is $38,415 while a family of four living in Connecticut could bring in up to $102,124 a year and still qualify for Chapter 7.
  
  

Pre-Filing Requirements

• Bankruptcy reform laws require those pursuing a case to complete pre-filing credit counseling. These sessions usually last about an hour and can be completed online, in person or by telephone. Not just any credit counseling agency will suffice. The debtor must complete the session with a federally-approved agency no more than 180 days before filing bankruptcy paperwork. Petitions submitted without evidence of credit counseling completion will be rejected.
  
  

Asset Considerations

• Before 2005, many homeowners could keep their property and still declare Chapter 7 bankruptcy. But bankruptcy reform changed that. In all Chapter 7 cases, a debtor cannot keep real estate equity worth more than $125,000. Exceptions are possible in Chapter 13, but the bankruptcy judge must approve the request. Retirement accounts and basic household goods are still exempt under reformed bankruptcy laws.