Filing for Chapter 7 bankruptcy is one way to solve debt problems -- but, it's not the only way. In several common situations, bankruptcy is either unwise or legally impossible.

1. You Previously Received a Bankruptcy Discharge

Chapter 13 bankruptcy has no such restriction; you can file for it at any time. So if you are barred from filing Chapter 7, and you want to file for bankruptcy quickly (for instance, to stop creditors' collection efforts), Chapter 13 may be an option.

Also, you cannot file for Chapter 7 bankruptcy if a previous Chapter 7 or Chapter 13 case was dismissed within the past 180 days because:

• you violated a court order, or
• you requested the dismissal after a creditor asked for relief from the automatic stay.

2. A Friend or Relative Cosigned a Loan

3. You Could Pay Your Debts Over Three to Five Years

If your monthly income exceeds your monthly expenses, giving you disposable income that can be used to pay your debts, you're at risk of having your case dismissed unless you agree to convert it to a Chapter 13 bankruptcy.

4. You Want to Prevent Seizure of Wages or Property

Normally, a creditor's only legal means of collecting a debt is to sue you, win a court judgment and then try to collect the amount of the judgment out of your property and income. A lot of your property, however, including food, clothing, personal effects and furnishings, is probably protected by law (exempt) from being taken to pay the judgment. And, quite likely, your nonexempt property is not worth enough to tempt a creditor to go after it, as the costs of seizure and sale can be quite high.

Creditors usually first go after your wages and other income. Here too, however, laws protect you. Only 25% of your net wages can be taken to satisfy a court judgment (up to 50% for child support and alimony). And often, you can keep more than 75% of your wages if you can demonstrate that you need the extra amount to support yourself and your family. Income from a pension or other retirement benefit is usually treated like wages. Creditors cannot touch public benefits such as welfare, unemployment insurance, disability insurance or Social Security.

5. You Just Want to Stop Harassment by Creditors

If your only concern is that creditors are harassing you, bankruptcy is not necessarily the best way to stop the abuse. You can hang on to your bankruptcy option but still get creditors off your back by taking advantage of federal and state debt collection laws that protect you from abusive and harassing debt collector conduct.

6. You Defrauded Your Creditors

Certain activities are red flags to the courts and trustees. If you have engaged in any of them during the past year, do not file for bankruptcy until you consult a bankruptcy lawyer. These no-nos are:

• unloading assets to your friends or relatives to hide them from creditors or from the bankruptcy court
• incurring debts for non-necessities when you were clearly broke
• concealing property or money from your spouse during a divorce proceeding, and
• lying about your income or debts on a credit application.

Last-minute debts presumed to be nondischargeable include:

• debts of $1,150 or more to any one creditor for luxury goods or services made within 60 days before filing, and
• debts for cash advances in excess of $1,150 obtained within 60 days of filing for bankruptcy.

To discharge luxury debts, you will have to prove that extraordinary circumstances required you to make the charges and that you really weren't trying to put one over on your creditors. It's an uphill job. Judges often assume that people who incur last minute charges for luxuries were on a final buying binge before going under and had no intention of paying.

7. You Attempt to Defraud the Bankruptcy Court

Filing for bankruptcy is not considered a crime. But you must sign your bankruptcy papers under "penalty of perjury" swearing that everything in them is true. If you deliberately fail to disclose property, omit material information about your financial affairs or use a false Social Security number (to hide your identity as a prior filer), and the court discovers your action, your case will be dismissed and you may be prosecuted for fraud.