Chapter 7 Mistakes That Can Force Your Case into Chapter 13

Filing a Chapter 7 bankruptcy petition is often viewed by debtors as simply filling in the blanks. Unfortunately, simple errors or changes in your financial life right before filing can be devastating, forcing the debtor into a Chapter 13 five-year repayment plan.

As a professor and attorney focused on consumer bankruptcy law, I have seen cases where debtors who passed the initial Means Test later got pushed into a lengthy Chapter 13 repayment plan due to issues with disposable income.

Let’s review the most common and costly mistakes that every debtor and every bankruptcy attorney must avoid.

By Alexander Hernandez, J.D., Professor, and Author of Consumer Bankruptcy Law (Routledge).

Updated on December 11, 2025.

Key Points:

• Passing the Means Test does not guarantee Chapter 7. Excessive Disposable Income (Schedule I minus Schedule J) creates a presumption of abuse and can force you into a 5-year Chapter 13 plan.
• Making any significant financial change, like surrendering a car, prior to filing, removes the expense from your budget and can disqualify you by artificially increasing your disposable income.
• Unreported changes in income or assets (even minor ones) between consultation and filing can cause delays, complications, or denial under the totality of the circumstances test.
• Attorney negligence (failure to file promptly or missing deadlines) can lead to devastating consequences, including the loss of secured property like your home.

Mistake 1: Making Financial Decisions Without Consulting Your Lawyer

The Means Test vs. Disposable Income

Most people researching bankruptcy quickly learn about the Means Test, which compares a debtor’s income to the state median income for the six months before filing. Passing the Means Test only creates a presumption of eligibility for Chapter 7. But passing is only the first hurdle.

The Bankruptcy Trustee will also review your disposable income, the gap between your monthly income (reported on Official Bankruptcy Form Schedule I) and your allowable monthly expenses (reported on Official Bankruptcy Form Schedule J).

The Car Payment Trap

Qualifying for Chapter 7 Bankruptcy

Consider this common scenario:

A client meets with an attorney and qualifies for Chapter 7 based on their current budget, which includes a $500 monthly car payment.

Weeks later, thinking they are being financially savvy, the client decides to voluntarily surrender the car to the creditor without consulting their attorney. Their reasoning? Bankruptcy will eliminate the debt, and they can buy a cheaper car later and save money.

The Result: By surrendering the car, the debtor has eliminated the $500 car expense from Schedule J. The debtor now appears, on paper, to have an extra $500 in disposable income available each month to pay creditors.

This extra amount of available cash creates a presumption of abuse under §707(b) of the Bankruptcy Code. The debtor is suddenly viewed as able to repay their debts and is forced into a Chapter 13 plan, where they must pay $500 per month into the plan for up to 5 years.

Key Takeaway for Debtors

Do NOT make any significant financial changes, such as surrendering collateral such as cars, transferring property, refinancing debt, or making large pre-petition debt payments, until you have consulted with your bankruptcy lawyer!

Mistake 2: Failure to Review the Petition with Your Bankruptcy Attorney Prior to Filing

Even if you pass the Means Test and the disposable income review, the entire petition must be accurate up to the minute of filing.

Before your bankruptcy petition is filed, your attorney should review the entire packet with you to ensure there hasn’t been any change in your circumstances that could affect the case. Overlooking what seems like a minor issue, such as receiving an unexpected bonus, a change in job status, or a large tax refund, could lead to unnecessary complications.

The Solution: Confirming Facts

Confirm the following with your lawyer right before the petition is filed:

• Has your income changed?
• Have you sold or acquired any assets, including gifts or inheritances?
• Are you currently behind on a secured payment? Filing Chapter 7 while you are even one month behind on a mortgage or car payment can put you at risk of losing that asset.

Mistake 3 & 4: Attorney Negligence (The Critical Final Steps)

Even with the best preparation, the process depends on the bankruptcy attorney filing the petition correctly and promptly. Unfortunately, simple legal oversight can be devastating.

Mistake 3: Failure to File the Petition Promptly

I have witnessed costly mistakes made by lawyers who fail to file the bankruptcy petition in a timely manner.

Example: One lawyer failed to file a petition for months. The client passed away before the petition was submitted, and because the debts were not eliminated in bankruptcy, creditors filed claims against the probate estate, significantly reducing the inheritance for the beneficiaries.

Mistake 4: Missing Critical Deadlines (Losing the Home)

Bankruptcy lawyers missing critical sale dates on foreclosures or allowing a Chapter 13 case to lapse happens more often than one would think.

Example: In one memorable case, a bankruptcy attorney failed to reinstate a client’s Chapter 13 case, and the home was subsequently sold at a foreclosure auction. The lawyer knew this would lead to a malpractice complaint and likely disbarment, so they bought the house at auction and held the mortgage.

While this luckily resulted in the client keeping their house with a very low interest rate, it was still a legal disaster that should have been avoided.

Protect Yourself: The Final Confirmation

After you have reviewed and signed the final petition, confirm with your bankruptcy attorney that the documents have been electronically filed with the court and that you have received the official bankruptcy case number and filing date. This simple confirmation is your final insurance against procedural negligence.

If there is a lawsuit pending, whether a credit card lawsuit, a car repossession, or a foreclosure, remember that filing the Suggestion of Bankruptcy might be required.

Professor’s Note: The figures for the Means Test are updated twice annually. When the state average is increased, this helps you qualify for the Means Test. So if you recently calculated your income and failed the Means Test, recalculate the figures as they were updated recently. The latest Means Test figures can be found via this link.

Colleges and universities can purchase my bankruptcy law textbook directly from Routledge Publishing. Paralegals and students who are buying single copies can do so via Amazon Books. To access my YouTube channel, click this link. You can also listen to my podcast on Spotify.

You can learn more about filing for bankruptcy and the bankruptcy petition via this link. Information on the bankruptcy court system, contact information for trustees, and your state’s exemptions can be found here. The federal bankruptcy exemptions are listed here. The latest version of the 341 Meeting of the Creditors can be found here.

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Updated on April 28, 2025.