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What is Chapter 7 bankruptcy and how can you discharge debts?

Chapter 7 of Title 11 of the United States Bankruptcy Code helps discharge debts through the liquidation process under the U.S. Bankruptcy Laws. It is the most widespread method of bankruptcy filing in the U.S.

How can I help you get a bankruptcy discharge?

Once you contact us:

  • You will work with my assistant, who will collect information and analyze your financial situation.
  • I can explain different types of bankruptcy and give you an idea of which type is best for you.
  • I can tell you if declaring Chapter 7 bankruptcy is your best option.
  • I will explain your state’s Chapter 7 bankruptcy laws to avoid any mistakes.
  • I will help you understand the Chapter 7 eligibility criteria clearly.
  • I can help you apply for the means test.
  • I can help you understand the correct value of your assets.
  • I can explain how to use state and federal exemption rules to protect your assets.
  • I can help you understand which debts can or can’t be discharged in bankruptcy.
  • I can help you fill out the forms and complete the paperwork necessary to file for Chapter 7 bankruptcy protection.
  • I will notify your creditors that you have filed for bankruptcy and they can’t harass you anymore.
  • After filing for Chapter 7 bankruptcy, an automatic stay is immediately imposed. If creditors violate the automatic stay, I can help you take legal steps against them.
  • I will help you answer all the questions in the creditors’ meeting.
  • I will help you go through the liquidation process successfully and discharge your debts.
  • You will be debt-free within 3-4 months.

What other services can you get to avoid bankruptcy?

What is Chapter 7 bankruptcy?

Chapter 7 bankruptcy (also known as straight bankruptcy) helps to discharge all your debts through a liquidation process. The court-appointed trustee may cancel many or all of your debts. However, they can also sell (liquidate) some of your assets to pay your creditors.

What happens immediately after you file bankruptcy?

If you file Chapter 7 bankruptcy, it immediately puts into effect an Order for Relief—informally known as the automatic stay. Once you file for Chapter 7, this automatic stay immediately stops all collection activities on the accounts. So for the time being (until the judgment is made), creditors cannot garnish your wages, empty your savings account, or go after your house, car or other property.

How long does Chapter 7 bankruptcy last?

The entire process takes around 3 to 4 months.

Chapter 7 bankruptcy timeline

  • Day 1 - 14
    Submit bankruptcy petition to the court.
    Pay the bankruptcy filing fees
    Submit your credit counseling certificate, schedules, and other required papers
  • Day 13 - 33
    Submit your income tax returns to the IRS, if necessary
  • Day 20 - 40
    Attend the 341 creditors meeting
    File a Statement of Intention if you have not yet done so
  • Day 50 - 70
    The last date to file a Statement of Intention
  • Day 80 - 100
    Submit Reaffirmation Agreements
    Receive your bankruptcy discharge

When is Chapter 7 bankruptcy right for you?

You can qualify for Chapter 7 bankruptcy when:

1. You have very low or no disposable income

2. Your monthly income is less than the state median income

3. You have consumer debts

4. You have completed credit counseling and a financial management course

Who can’t file Chapter 7 bankruptcy?

You won’t be able to file for Chapter 7 bankruptcy if:

1. You have already received a bankruptcy discharge in the last six to eight years, depending on the type of bankruptcy you filed.

2. A previous Chapter 7 or Chapter 13 case was dismissed within the past 180 days.

3. You have enough income to satisfy a Chapter 13 plan.

4. The bankruptcy court finds that you have tried to cheat your creditors or concealed your assets.

What is the role of the bankruptcy trustee?

In Chapter 7 bankruptcy cases, the bankruptcy court exercises complete authority over its cases through a person called the ‘bankruptcy trustee.’ A bankruptcy trustee’s primary duty is to make sure that your creditors’ interests are protected. The trustee works hard to pay back the creditors as much as possible by liquidating your assets. The more assets the trustee recovers from you, the more the trustee is paid.

The bankruptcy trustee will examine your papers to make sure nothing is wrong with them and look for nonexempt property to sell for the purposes of paying off your creditors. The trustee also goes through your financial records from the previous several years to free up assets to liquidate and pay your creditors.

What happens in the creditors’ meeting?

One or two weeks after you file, you and your creditors will receive a notice from the bankruptcy court stating that a creditors’ meeting has been scheduled. The bankruptcy trustee conducts the meeting and, once you swear in, may ask you questions regarding your assets and the papers you have filed. For the meeting, the trustee may ask you to bring copies of your mortgage papers, car titles, latest bank statements, property deeds, tax returns, and paychecks. In most Chapter 7 bankruptcy cases, this is perhaps the only visit to the courthouse that a debtor has to make.

What debts can you discharge in Chapter 7?

  • Credit card debts
  • Medical debts
  • Utility bills
  • Unsecured personal loans

What debts are non-dischargeable in Chapter 7 bankruptcy?

Once you’ve finished all the required steps in the bankruptcy process, the court will wipe out your debt, except:

  • Unless the court determines otherwise, there are debts that can’t be discharged in bankruptcy, such as child support, alimony, most tax debts, court fees, homeowner’s association fees, and student loans.
  • Personal injury debts you have incurred due to your fault in a drunk and driving case.
  • Debts that the court declares non-dischargeable because of protest from the creditor’s end. This usually applies only to debt incurred as a result of some form of fraud or scam.

How much does it cost to file for Chapter 7 bankruptcy?

Filing for Chapter 7 bankruptcy is relatively inexpensive, with filing and administrative fees of $338. There are a few other costs associated with filing Chapter 7, including possible fees like appraisal fees, title search charges, required pre-filing credit counseling, and a post-filing course on financial management.

The bankruptcy trustee charges a fee for monitoring your case that may range between $15 and $20, which may increase the cost to file Chapter 7. If you can’t afford the cost of filing Chapter 7, then you can ask the court to allow you to pay the filing fee in installments.

A Chapter 7 bankruptcy attorney typically charges a fee between $500 and $3500. So, the cost goes up even further.

What happens to your property in Chapter 7 bankruptcy?

If the bankruptcy trustee determines that you have some nonexempt property, you are required to either yield that property or provide the trustee with its equal value in cash. However, if the property’s value is not enough to pay off the debt, or is troublesome for the trustee to sell, the trustee may abandon the property. This means that even though the property is nonexempt, you can keep it.

The list of exempt and nonexempt property varies from state to state. You can find out the details of exempt and nonexempt property in the bankruptcy laws of your state.

How are secured debts treated in Chapter 7?

If you have secured debt, which are debts you incurred by providing collateral, and if you are behind on your bills, the creditor may ask the court to raise the automatic stay to repossess or foreclose on your property. However, if you are paying your bills on time, you can keep your property and make the payments as before.

Again, if a creditor has imposed a lien on your property on an unpaid debt, the debt will be considered secured. However, if you file for Chapter 7, you may be able to remove the lien.

Can you file for bankruptcy without your spouse?

Yes. Chapter 7 bankruptcy laws allow you to file bankruptcy without your spouse. However, it may affect your spouse, depending on:

1. Whether or not you have joint assets or debts with your spouse

2. The property and bankruptcy laws in your state

3. Whether you’re filing Chapter 7 or Chapter 13 bankruptcy

If you file bankruptcy without your spouse, remember that discharged joint debts will be reported on your spouse’s credit report as well as yours. Also, creditors can still come after your spouse for payments since the automatic stay will not be imposed on them because they are not under Chapter 7 bankruptcy protection.

When can your Chapter 7 bankruptcy be dismissed?

1. You have committed bankruptcy fraud

2. You don’t pass the means test

3. You don’t complete the compulsory education course

4. You don’t pay your Chapter 7 bankruptcy filing fees

5. You don’t submit the necessary bankruptcy forms and documents

6. You don’t attend the 341 meeting

Can you file bankruptcy Chapter 7 online?

Good news! You can.

Usually, filing Chapter 7 involves three steps.

  • Step 1: Filling out bankruptcy forms
  • Step 2: Submitting them to the court
  • Step 3: Attending the 341 meeting

You can do the first two steps online, but you have to attend the 341 meeting in person. It’s best to consult an attorney before filing for Chapter 7 bankruptcy online because an experienced bankruptcy attorney will know the steps and laws.

How long does Chapter 7 stay on your credit report?

It stays on your credit report for ten years.

What was the 2005 amendment to federal bankruptcy law?

On October 17, 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) came into effect - the biggest amendment to the US Bankruptcy Code since 1978. One of the major stated purposes of this amendment was to prevent abuses of bankruptcy laws. These are some of the new requirements that came into effect as the result of BAPCPA.

Means test:

Debtors filing for Chapter 7 bankruptcy are now required to fill out the Official Bankruptcy Form, 22A. This form is meant explicitly for means test debtors’ eligibility to file bankruptcy by requiring them to disclose their monthly income and expenses.

The means test is used to determine whether your income is low enough for you to file Chapter 7 bankruptcy. The means test is essentially a formula designed to keep filers above a certain income level from filing Chapter 7 bankruptcy. This doesn’t mean that you have to be broke to qualify. You can have significant monthly income and still pass the means test if you have high expenses, such as huge mortgage payments.

Credit counseling:

Eligibility to file is another section of the law that BAPCPA changed drastically. In the changed legislation, no debtor is eligible to file for Chapter 7 unless the debtor receives an individual or group briefing from a nonprofit credit counseling agency approved by the US Department of Justice within 180 days of filing. The debtor should also complete an instructional course concerning personal financial management. Not doing this may compromise the bankruptcy.

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