"What can you not do after filing Chapter 7 bankruptcy?"

That is the title of an article by Angelica Leicht and published on cbsnews.com, "What can you not do after filing Chapter 7 bankruptcy?" dated May 14, 2025. In it the author states, "You can't keep all your assets. While each state offers a list of "exempt" property you can protect, like modest home equity and personal items, anything deemed non-exempt may be seized and sold by the bankruptcy trustee. That could include second cars, valuable collections or investment properties. If you have significant equity in certain assets, Chapter 7 could cost you more than you bargained for."

This is one of the most common concerns raised by people who call me, inquiring about bankruptcy. "Will I be able to keep my car," and "Will I be able to keep my house?" My answer to those questions is, "Almost always, Yes, and if you were one of the rare cases in which that would not happen, I would let you know that prior to filing your bankruptcy."

I strongly disagree with the statement, "You can't keep all your assets." Even if the statement was prefaced with "usually" or "often," it wouldn't be accurate.

For a more realistic view on retaining assets in a Chapter 7 bankruptcy, we can find assistance in the The Yale Law Journal article, "One Size Fits None: An Overdue Reform for Chapter 7 Trustees" (2022) by Belisa Pang and Emile Shehada. Relying on the Federal Judicial Center's bankruptcy data, the authors found that, "Trustees administer assets in roughly 33% of corporate liquidations under Chapter 7.... By comparison, in 6% of consumer liquidations, trustees administer, on average, a trifling $159,192. The other 94% do not involve unencumbered assets for which the trustee will be paid."

That's right, 94% of Chapter 7 consumer bankruptcy cases are no-asset cases. That is, no assets are taken from the Debtor(s). (The percentage is likely higher because an asset case can also be created through the application of various rules such as those involving preferences and fraudulent conveyances. In those cases, a Chapter 7 Trustee can take assets from someone other than the Debtor to pay the Debtor's debts).

I wonder how many people, who could be significantly helped by the filing of a bankruptcy, never even pick up the phone to talk to a bankruptcy attorney because of inaccurate information like that in the above-referenced cbsnews.com article. Don't assume that a bankruptcy won't help you because of something you read on the internet. Call a bankruptcy attorney, and you may be pleasantly surprised!

can you not do after filing Chapter 7 bankruptcy?

Newest Means Test Numbers Go Up

Unlike the last revision of Means Test numbers, the median numbers for all household sizes have gone up, some of them fairly significantly. This will help many debtors who want to file under Chapter 7 rather than getting into the long slog of a 5-year Chapter 13 Plan.

Here are the new Wisconsin median income numbers for cases filed on or after April 1, 2024.

One person household: $66,106 (increase of $2,614)

Two person household: $82,346 (increase of $3,256)

Three person household: $101,490 (increase of $4,013)

Four person household: $122,571 (increase of $4,846)

Add $9,900 for each individual in excess of four. (no change)

A debtor filing under Chapter 7 submits a Means Test to the Bankruptcy Court that provides annual income based on the debtor's gross income in the six calendar months prior to filing. In other words, take your income in the 6 calendar months prior to filing and multiply by 2 and that is the income that is compared to the above median income numbers. You must include all sources of income other than Social Security and military disability income. For example, wages, capital gains, business profits, Foodshare, unemployment, child support, gifts, blood plasma, and many other kinds of income are included. If the Debtor's income is below the above median numbers for their household size, they will almost always be able to proceed under Chapter 7. But, if it appears to the U.S. Trustee that the Debtor could afford to be in a Chapter 13 even though the Debtor passes the Means Test, then the U.S. Trustee may object to the debtor being able to get a discharge in a Chapter 7 case. In that case, the Debtor would usually convert to a Chapter 13 case. The Debtor does have the option of opposing the U.S. Trustee's objection, in which case, a bankruptcy judge would make a decision. If you are above the median income, it is possible to proceed under Chapter 7, but your Means Test would become much more complicated. Certain types of debts and expenses can be taken into account that could allow a debtor with an above median income proceed under Chapter 7. In my experience, debtors above median who are allowed to proceed under Chapter 7 are usually those with very large tax and/or child support debt. Means Test issues can be very complicated. If you have questions about the bankruptcy Means Test, call us at (608)718-0497.

Will Student Loans Become Easier to Discharge in the Near Future?

The Department of Justice recently announced a new process for handling cases in which individuals seek to discharge their federal student loans in bankruptcy. The DOJ's stated goal is “to ensure consistent treatment of the discharge of federal student loans, reduce the burden on borrowers of pursuing such proceedings and make it easier to identify cases where discharge is appropriate.”

In their press release the difficulty of overcoming the “undue hardship” standard for student loan discharge and the role of the bankruptcy judge in making the final decision in conceded, but under the new process the DOJ's lawyers would be better able to “recommend discharge to the judge without unnecessarily burdensome and time-consuming investigations. The new process will also help borrowers who did not think they could get relief through bankruptcy more easily identify whether they meet the criteria to seek a discharge.”

The undue hardship test considers “the borrower’s past, present and future financial circumstances.” Under the new process the DOJ will review information provided by the Debtor and the Department of Education and “apply the factors that courts consider relevant to the undue-hardship inquiry and determine whether to recommend that the bankruptcy judge discharge the borrower’s student loan debt.”

The process to get a federal student loan discharged in a bankruptcy starts with the filing of a lawsuit by the Debtor in the bankruptcy court against the Department of Education. A government attorney is assigned to the case and in the past often seemed to take a default position of opposing the discharge.

My reading between the lines is that the DOJ seems to be indicating that they will be making an effort to make it easier to get some student loans discharged. Instead of seeming to take a default position of almost always opposing federal student loan discharges, they will be more likely to recommend discharge than they have in the past. However, bankruptcy judges could continue to use a strict interpretation of the "undue hardship" standard and rule against discharge as readily as they have in the past.