Chapter 7

The purpose of a Chapter 7 bankruptcy is to give the honest but unfortunate debtor a fresh start by granting him relief from his creditors. Most debts are capable of being discharged (eliminated) through the filing of a Chapter 7 bankruptcy petition.

This includes credit card debts, medical bills, deficiencies on repossessed automobiles or foreclosed homes and many types of judgments. Contrary to popular belief, many types of taxes can also be discharged through a bankruptcy. Certain types of debts may not be eliminated through bankruptcy, such as debts for domestic support obligations, student loans, or obligations incurred through fraud. The bankruptcy process requires you to fill out a series of documents, called bankruptcy schedules, which ask you to list all of your assets and all of your debts. There is also a series of questions designed to help you look at your financial picture over the past several years.

Once your bankruptcy case has been filed, an independent party, called a trustee, is appointed to oversee your case. The trustee’s job is to liquidate all of your assets which are deemed non-exempt and use the funds to pay whatever portion of your creditors can be paid (see the separate topic “Exemptions” for an explanation of the types of property you are allowed to keep). Before you can file your bankruptcy, you are required to complete a consumer credit counseling class that can usually be done online or by telephone and takes approximately 60 minutes.

After your case has been filed, a meeting will be scheduled with your bankruptcy trustee. In this meeting, your trustee will ask you questions about your bankruptcy filing. This meeting typically lasts 5 to 10 minutes. Unless your case presents complications, this will be your only court appearance. If there are no complications or creditors claiming that you committed some type of fraud, approximately 60 days after the meeting you will receive a discharge in the mail and your case will be concluded.