Chapter 7 Bankruptcy Overview

Chapter 7 bankruptcy requires the debtor to sell all of their non-exempt property in order to repay as much of their unsecured debt as possible.

In order to file for bankruptcy, the debtor must go to their local Federal Bankruptcy court and file a petition which includes a complete statement of their debts and assets. Anyone considering Chapter 7 should be aware that misrepresenting or not including an asset could lead to the dismissal of the bankruptcy petition.

Once the petition has been filed, an "automatic stay" is put into place. Once the automatic stay has taken affect, creditors cannot try to collect on the debts owed to them unless they can convince the court that their interests would be damaged by the automatic stay. The bankruptcy judge then appoints a trustee who goes through the debtor’s assets and oversees the sale of the debtor’s nonexempt property and the distribution of the proceeds to the creditors in accordance with the Bankruptcy Code.

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Between 20 to 40 days after the bankruptcy petition is filed, the trustee holds a meeting with your creditors, called the “341 Meeting”. The objective of this meeting is to give the trustee and your creditors a chance to ask questions to the debtor. Normally creditors are not allowed to meet with the debtor for demanding any reimbursement or any kind of further claim whatsoever except at the meeting. All questions posed to the debtor during this meeting are under oath, and carry the penalty for perjury.

Finally, almost all your debts are discharged and you have no further obligations toward the debts that were included in the bankruptcy petition. After filing Chapter 7 Bankruptcy, you are barred from filing for Chapter 7 bankruptcy for six years.

Additional Resources

• Chapter 7 Vs Chapter 13
• Recent Changes to Bankruptcy Law
• How to File Bankruptcy
• Bankruptcy Filing Fees
• The Automatic Stay
• The 341-Meeting

Bankruptcy Laws overview | Faqs on Bankruptcy | Bankruptcy Terms

US State Bankruptcy Laws