Chapter 7 Information
A Little More Detail about Chapter 7 Bankruptcies
Chapter 7 is intended to be a complete liquidation bankruptcy. However, the term “liquidation” is somewhat misleading. Chapter 7 is referred to as Liquidation because your non-exempt assets are liquidated (converted to cash) to pay part of the debtor’s outstanding bills.
Although businesses that file Chapter 7 frequently have assets to liquidate, most consumer debtors do not. Most or all of an individual consumer debtor’s assets will be exempt from being sold by the Trustee to satisfy the debts. If that’s the case, there is no actual liquidation.
Chapter 7 bankruptcy cases move relatively quickly, and a debtor may receive the discharge in just a few months. The discharge will eliminate most unsecured debt, but there are exceptions. Some items, like child support, some taxes and most student loans, can’t be discharged.
In order to file bankruptcy under Chapter 7, you have to qualify through a means test. Most people who are considering Chapter 7 qualify, but if you don’t qualify you may be able to file under Chapter 13.
Chapter 7 bankruptcy may be right for you if you:
- Have no filed bankruptcy and received a discharge in the last 8 years
- Have no income or low income
- Have little or no money left after paying your necessary living expenses each month
- Rent or have little equity in your home
- Have few assets (or no assets) outside your furniture, clothing and other necessities
In most instances, a Chapter 7 bankruptcy case is relatively quick; typically, a case will be completed and the debtor will receive a discharge within six months of the filing of the bankruptcy petition.