- You can't qualify for Chapter 7 unless your average income for the six months before filing is below the state median, or your income, adjusted for expenses, passes a means test. If your family income has dropped -- because of a job loss, for example -- it's perfectly legal to wait to file until your average income has gone down. It's also a good strategy to wait if you have big bills coming due, so that those debts will be covered by the discharge.
- Federal law protects some of your assets from bankruptcy sale; your state's laws may offer an alternative set of exemptions or allow you to choose either the federal or state list. Edward Haman of Sphinx Legal says online that it's legal to sell nonexempt property and buy more exempt property, but not if it's done to defraud your creditors. This is something bankruptcy courts decide on a case-by-case basis, so be careful; if the court decides you're cheating, it can deny you a debt discharge.
- You cannot discharge some debts, such as child support and student loans, by filing bankruptcy. You can, however, use nonexempt assets to pay those debts off. Chapter 7 treats all other creditors equally; if you try paying back a business partner or relative in the year before you file, the court can void the transfer and divide up the money among all your creditors. Possible strategies are to wait longer than a year after paying them or to pay back the debt after the discharge, even though you don't have to.
- Although it's legal to wait until your income is low enough to file, actively keeping your income low by refusing job offers or working less is not. Running up big credit card bills a couple of months before you file isn't acceptable either: If the court decides you had no intention of paying the money back, it can force you to honor the debts. Anything that indicates you're filing bankruptcy in "bad faith" could cost you the bankruptcy discharge.
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