What Disqualifies You from Chapter 7?
Either dishonesty or good fortune could serve to disqualify people from bankruptcy. This legal debt relief program is only available to honest and unfortunate debtors. Dishonest debtors lie on official forms or don’t cooperate with the trustee (person who manages a bankruptcy for a judge). Dishonest debtors also have debts related to fraud or other criminal activity. The “fortunate” bankruptcy disqualification is more important for purposes of this post.
Qualifying for bankruptcy is the first step on a path that ends with a fresh financial start. A Chicago bankruptcy lawyer reviews your financial situation and determines not only the qualification for Chapter 7, but also whether Chapter 7 or Chapter 13 is a better option for you and your family. Only an experienced lawyer provides this level of professional advice. Furthermore, only a Chicago bankruptcy lawyer advocates for debtors throughout the bankruptcy process.
Formal Qualifications
Some formal qualifications are simple technicalities that are rather straightforward. The means test, the largest formal qualification in a Chapter 7, is a different beast.
All bankruptcy debtors must complete a pre-filing debt counselling class. Most debtors have been to debt counselling before they reach out to Chicago bankruptcy lawyers. Note that some debt counselling classes, such as most church groups, don’t count. If needed, these classes are available online. They generally take less than two hours to complete and cost less than $50.
Furthermore, all bankruptcy debtors must complete a post-filing budgeting class. Bankruptcy courts often periodically sponsor free seminars that satisfy this requirement. Once again, if needed, these classes are available online. They generally take less than two hours to complete and cost less than $50.
The means test is a financial qualification. Normally, the debtor’s household income must be lower than the state average income for that family size. As of May 15, 2025, the average annual income for a family of four in Illinois is $132,536, at least according to the federal government.
If a debtor’s income is at or near this line, a back door may be available. Frequently, a lawyer uses the debtor’s actual monthly income and expenses to qualify the debtor for Chapter 7. The aforementioned figure is a statewide figure. The cost of living in Chicago is higher than in other parts of the state. Therefore, a family of four could earn more than $132k and still be in the red each month. More on that below.
Informal Qualifications
The qualifications include a negative Schedule I/Schedule J balance and, for lack of a better phrase, the need for bankruptcy relief.
Schedule I is the debtor’s monthly income. Schedule J lists the debtor’s monthly expenses. If the debtor is in the black every month, many trustees question the need for a radical solution to a debt problem, such as Chapter 7. No one likes it when officials ask prying questions.
When debtors are in the red each month, or barely in the black, they clearly need bankruptcy relief. The same thing is true if they voluntarily reaffirm few obligations.
Reaffirmation agreements are part of the Chapter 7 process. This legal action wipes out all existing mortgage contracts, auto loans, and other such agreements. If they want to retain the property, debtors must keep making payments, and they must reaffirm these agreements. Trustees get that.
However, if a debtor reaffirms credit card or other debt that’s normally dischargeable, the trustee may not approve the petition, forcing a Chicago bankruptcy lawyer to implement Plan B, whatever that may be.
Contact a Diligent Cook County Lawyer
No matter what kind of financial problem you are having, there’s a way out. For a confidential consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. Convenient payment plans are available.
