Facts About Chapter 7 Bankruptcy

By Elizabeth Stock

Filing for Chapter 7 bankruptcy is a big decision that will affect your credit score and ability to qualify for personal loans and credit cards in the future. Therefore, getting the facts is essential. For example, you must first determine whether you are eligible to file for Chapter 7 bankruptcy. If you do file, you will have to appear at a meeting of creditors before you will receive a bankruptcy discharge.

Filing for Chapter 7 bankruptcy is a big decision that will affect your credit score and ability to qualify for personal loans and credit cards in the future. Therefore, getting the facts is essential. For example, you must first determine whether you are eligible to file for Chapter 7 bankruptcy. If you do file, you will have to appear at a meeting of creditors before you will receive a bankruptcy discharge.

Eligibility

According to the Bankruptcy Code, you must determine whether you are eligible before filing for Chapter 7 bankruptcy. For example, you must either make less than the median income for your state or satisfy the means test. The means test evaluates your income and reasonable monthly expenses to determine your monthly disposable income. The higher your monthly disposable income, the less likely you are to be eligible to file for Chapter 7 bankruptcy.

Get a free, confidential bankruptcy evaluation. Learn More

Automatic Stay

Once you file your bankruptcy paperwork, including the bankruptcy petition asking the court for relief and the schedules that list your assets and debts, an automatic stay takes effect and offers you immediate protection. The automatic stay prohibits most of your creditors from contacting you directly, and the harassing phone calls and letters will stop. Your creditors must instead communicate with you through your Chapter 7 bankruptcy trustee or your lawyer. The bankruptcy clerk will mail a notice of your bankruptcy case to the creditors listed in your bankruptcy paperwork.

Procedure

For most Chapter 7 bankruptcy cases, the only time you will need to appear in person before the bankruptcy trustee is at the meeting of the creditors, or the 341 meeting. This meeting typically occurs between 21 and 40 days after you file your bankruptcy case. During the meeting of the creditors, your bankruptcy trustee will ask you questions about your paperwork to confirm that the information is accurate and ensure that no changes to your financial situation have occurred. Your creditors are able to attend this meeting and ask you questions as well. The bankruptcy discharge typically occurs 60 days after the meeting of the creditors.

Discharge

All dischargeable debts that you include as part of your bankruptcy case will be erased when your discharge is granted. These debts will no longer be legally enforceable and creditors will not be able to sue you in an effort to collect. An example of a dischargeable debt in bankruptcy is credit card debt. However, some debts are nondischargeable, including child support obligations and student loan debt.

Get a free, confidential bankruptcy evaluation. Learn More
How Long Is an Automatic Stay After a Chapter 13 Dismissal?

References

Related articles

Types of Bankruptcy Fraud

Bankruptcy fraud is engaging in any act that misleads the bankruptcy court. There are several types of bankruptcy fraud including concealing assets and filing for bankruptcy multiple times in different states. If you commit bankruptcy fraud, the consequences can be severe including the dismissal of your bankruptcy case, fines and possible jail time. Learning about the possible types of bankruptcy fraud can help you avoid making costly mistakes.

Can I Be Sued After Chapter 7?

If your debts have become unmanageable, you have the option to file for bankruptcy protection. Under Chapter 7 of the federal bankruptcy code, you must submit a petition in bankruptcy court. You must notify the court of creditors to whom you owe money, and list your assets on the petition. A trustee takes control of your assets, which can be liquidated (sold) to pay secured debts. During this process, you are temporarily protected from creditor lawsuits.

What Do I Do When I Leave Out a Creditor in a Bankruptcy?

When you file the initial petition for bankruptcy, you will complete a schedule that lists all of your creditors and the amount of debt you owe for each. Each creditor listed on your bankruptcy schedule is included in your bankruptcy case. Once you realize you have excluded a creditor from your petition, there might be a few things you can do to correct the omission. However, sometimes adding a creditor to a bankruptcy petition is impossible, and you might be left with a debt that survives your bankruptcy case.

Related articles

What Won't Be Dismissed in Chapter 7

In a Chapter 7 bankruptcy, often called liquidation bankruptcy, a debtor's non-exempt assets are sold to pay the ...

How Long Before Debt is Discharged After Bankruptcy?

A bankruptcy discharge is available to you at the completion of your bankruptcy case. Your debt is erased when you ...

How Will I Be Notified That My Chapter 7 Bankruptcy Case Is Closed?

The closing of a Chapter 7 bankruptcy case signifies the end of the bankruptcy. At the end of the case, you will ...

Can Banks Garnish Assets if Bankruptcy Is Filed?

Receiving a discharge of debts through bankruptcy provides debtors with a fresh financial start. However, relief often ...

Browse by category