What can you not do in a Chapter 7 bankruptcy?

When Americans are drowning in debt — and a lot of them are right now, considering that recent data shows credit card balances have topped $1.2 trillion with average credit card APRs hovering above 22% — filing for Chapter 7 bankruptcy can seem like the ultimate lifeline. After all, it's called the "fresh start" bankruptcy for good reason: Eligible debts get wiped out in a matter of months, offering relief that can feel impossible to achieve through traditional repayment. For borrowers facing overwhelming financial pressure, it represents a way to hit the reset button on their financial lives.

But Chapter 7 isn't the type of tool that will make every debt-related problem disappear. While it's powerful, this form of bankruptcy comes with specific rules and limitations that can catch filers off guard. Understanding what you can actually accomplish through Chapter 7, and more importantly, what you can't, is essential before you make this significant legal and financial decision. The last thing you want to do is go through the bankruptcy process only to discover it didn't solve the problems you were hoping to address.

That's why knowing the boundaries of Chapter 7 matters just as much as understanding its benefits, as these restrictions shape whether this approach is truly the right solution for your situation. What exactly can you not do in a Chapter 7 bankruptcy, though?

Learn more about the debt relief options available to you here.

What can you not do in a Chapter 7 bankruptcy?

Chapter 7 bankruptcy comes with several important limitations that affect both what debts get discharged and what actions you can take, including the following:

You cannot discharge certain types of debt. Some obligations survive bankruptcy no matter what. Student loans remain unless you can prove undue hardship in a separate proceeding, and that's an extremely difficult legal standard to meet. Recent tax debts (typically less than three years old), child support, alimony and most court-ordered fines and penalties can't be eliminated either. If these debts represent the bulk of your financial burden, Chapter 7 may not provide the relief you're seeking.

You cannot keep non-exempt property beyond certain limits. While bankruptcy exemptions protect essentials like a primary residence (up to certain equity limits), a vehicle and basic household items, you can't shield unlimited assets. If you own a second home, valuable collectibles or have significant equity in property that exceeds your state's exemption amounts, the bankruptcy trustee can sell these assets to pay creditors. The specific exemptions vary by state, but the point is that Chapter 7 isn't a way to keep everything while shedding all debt.

You cannot file again immediately. If you've previously filed for Chapter 7 bankruptcy, you must wait at least eight years before you can file again. This limitation means you need to think carefully about timing and whether your financial situation is truly appropriate for this option now, or if you might face debt problems again in the near future.

You cannot hide assets or income. Bankruptcy fraud is a federal crime. You're required to disclose all assets, income sources and recent financial transactions during the bankruptcy process, and attempting to transfer property to friends or family before filing, concealing income or lying on your bankruptcy petition can have big repercussions. For example, it can result in your case being dismissed, your debts remaining in place or even potential criminal prosecution.

You cannot incur new debt with the intention of discharging it. If you rack up credit card charges or take out loans shortly before filing bankruptcy, especially for luxury items or cash advances, creditors can challenge these debts. And, if they do, the courts may determine they're non-dischargeable due to fraud.

Find out whether you qualify for credit card debt forgiveness today.

How debt relief alternatives compare to Chapter 7

Given the limitations of Chapter 7, there's a chance that other debt relief strategies might better address your specific situation. These types of programs are typically offered by debt relief companies or credit counseling agencies, and a few may be good alternatives to bankruptcy in particular.

Debt settlement programs, for example, will allow you to negotiate with your creditors to try and pay less than you owe, typically without the long-term credit impact or asset liquidation concerns of bankruptcy. These programs lead to settling for 30% to 50% less than the full balance on average, and they work particularly well if you have unsecured debts like credit cards or medical bills, but you don't qualify for Chapter 7 or want to avoid bankruptcy's public record.

Debt consolidation offers another potential path out of debt by combining multiple debts into a single payment, typically at a lower interest rate. This approach makes it easier and more affordable to pay off what's owed, and it lets you keep your assets, avoid bankruptcy on your record and often resolve debt faster, especially if you can qualify for favorable loan terms. 

Or, for some borrowers, simply working with a credit counseling agency to establish a debt management plan can provide structure and lower debt-related costs without legal proceedings. A debt management plan is tailored to fit into your specific budget, and the credit counselor works with your creditors to try and lower your interest rates and fees, making it more affordable to pay off what you owe.

The right choice, though, ultimately depends on your debt types, income stability and long-term financial goals. If most of your debt is from student loans or recent taxes, which are debts that Chapter 7 won't discharge, pursuing alternatives typically makes more sense than going through bankruptcy.

The bottom line

Chapter 7 bankruptcy is a powerful tool for eliminating overwhelming unsecured debt, but it's not a universal solution. You can't discharge student loans, recent taxes or support obligations, and you can't shield unlimited assets from liquidation. Understanding these boundaries before filing helps you make an informed choice about whether Chapter 7 truly addresses your financial challenges or whether alternatives like debt settlement or consolidation might serve you better. The key is matching the debt relief strategy to your specific situation rather than assuming bankruptcy automatically solves everything.