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Chapter 7 debt limit -- is that a thing?

When thinking about pursuing bankruptcy, it is perfectly normal to have questions about it. Obviously, one wants to make sure it is the right thing to do before going down that road. One question Illinois residents may have about Chapter 7 bankruptcy in particular is if there is a debt limit -- meaning, is it possible to have too much debt, which would result in one's petition being denied?

Unlike Chapter 13 bankruptcy, Chapter 7 does not have a debt limit. This means that, as long as a person meets the income restrictions associated with this type of bankruptcy, all qualifying debts may be discharged. Wondering what the income restrictions are and what debts are considered qualifying?

In order to qualify for a Chapter 7 bankruptcy, one's income level cannot exceed the state's median income level, or one's disposable income must be pretty much non-existent. Taking a means test can help a person determine if he or she meets the income restrictions needed to pursue a Chapter 7 filing. When it comes to debt discharge, there are quite a few debts that do not qualify. These include certain tax debts, alimony payments, child support obligations, and civil or criminal court judgments -- among various others. Legal counsel can review one's debt situation and confirm what financial obligations would remain, following a bankruptcy discharge. 

Illinois residents who struggle with severe financial difficulties -- regardless of how they got there -- may consider a Chapter 7 or Chapter 13 bankruptcy filing. Both have pros and cons, but two significant benefits of Chapter 7 over Chapter 13 are that there is no debt limit and debt is wiped off one's record. Under the right circumstances, this makes it a debt relief solution certainly worth considering.

Source:, "Chapter 7 -- Bankruptcy Basics", April 13, 2018

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