{"id":17558,"date":"2022-04-19T10:49:00","date_gmt":"2022-04-19T16:49:00","guid":{"rendered":"https:\/\/www.lexingtonlaw.com\/blog\/?p=17558"},"modified":"2024-11-13T14:17:14","modified_gmt":"2024-11-13T20:17:14","slug":"chapter-7-bankruptcy","status":"publish","type":"post","link":"https:\/\/www.lexingtonlaw.com\/blog\/life-events\/chapter-7-bankruptcy.html","title":{"rendered":"What is Chapter 7 bankruptcy? A liquidation guide"},"content":{"rendered":"\n
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The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. <\/em>See Lexington Law\u2019s editorial disclosure for more information.<\/em><\/a><\/p>\n\n\n\n

Sometimes, people get stuck underwater in various types of debt, and it can be difficult to stay afloat. Fortunately, Chapter 7 bankruptcy allows people to eliminate some of this debt so they can have a fresh start. Filing involves getting documentation of your finances, taking courses and getting the help of a legal professional, but it\u2019s worth the effort.<\/p>\n\n\n\n

If you\u2019re considering filing bankruptcy<\/a> under Chapter 7, you\u2019ll need to understand exactly what it is as well as the pros and cons. Chapter 7 bankruptcy helps people eliminate overwhelming debt, and today we\u2019ll discuss the details of filing and why you may want to talk with a bankruptcy attorney to see if it\u2019s the right option for you. Many attorneys even offer free consultations to help you make your decision about bankruptcy.<\/p>\n\n\n\n

<\/a>Table of contents<\/strong><\/h2>\n\n\n\n
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  1. What is Chapter 7 bankruptcy?<\/a><\/li>\n\n\n\n
  2. How does Chapter 7 bankruptcy work?<\/a><\/li>\n\n\n\n
  3. Who qualifies for Chapter 7 bankruptcy?<\/a><\/li>\n\n\n\n
  4. What do you lose when filing for Chapter 7 bankruptcy?<\/a><\/li>\n\n\n\n
  5. What can you keep when filing for Chapter 7 bankruptcy?<\/a><\/li>\n\n\n\n
  6. What\u2019s the difference between Chapter 7, Chapter 11 and Chapter 13 bankruptcy?<\/a><\/li>\n\n\n\n
  7. How to file for Chapter 7 bankruptcy<\/a><\/li>\n\n\n\n
  8. How long does filing a Chapter 7 bankruptcy take?<\/a><\/li>\n\n\n\n
  9. How much does it cost to file Chapter 7?<\/a><\/li>\n\n\n\n
  10. Pros and cons of filing Chapter 7 bankruptcy<\/a><\/li>\n\n\n\n
  11. How long does Chapter 7 stay on credit reports?<\/a><\/li>\n\n\n\n
  12. What to expect after filing<\/a><\/li>\n<\/ol>\n\n\n\n

    What is Chapter 7 bankruptcy?<\/strong><\/h2>\n\n\n\n

    Chapter 7 bankruptcy, sometimes also known as liquidation bankruptcy or fresh start bankruptcy, is for individuals who are unable to make their regular payments toward their debts. Under Chapter 7, your nonexempt belongings and property are liquidated to repay creditors, and all remaining dischargeable debt is discharged upon completion of the bankruptcy process.<\/p>\n\n\n\n

    A common misconception about filing for this kind of bankruptcy is that it will wipe away all of your debts, but the Chapter 7 bankruptcy definition is a bit more nuanced. We\u2019ll be discussing dischargeable vs. non-dischargeable debts so you have a better understanding of which debts are and aren\u2019t eliminated.<\/p>\n\n\n\n

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    How does bankruptcy (Chapter 7) work?  <\/strong><\/h2>\n\n\n\n

    If you\u2019re considering filing for Chapter 7 bankruptcy, a great first step may be to consult a professional to see if you qualify and if it\u2019s the right option for you. Typically, the professional will be a lawyer who specializes in bankruptcy, and they can show you how to file for Chapter 7 bankruptcy. They\u2019ll have you gather all of your financial information, which can include your income, your debts and a wide range of financial statements like bank statements.<\/p>\n\n\n\n

    The length of time from start to finish can vary by a few months, but some immediate actions are taken once you begin the process of filing for bankruptcy. The lawyer you\u2019re working with will file the initial paperwork to the court stating that you\u2019ll be filing for bankruptcy.<\/p>\n\n\n\n

    What happens when you file for bankruptcy?<\/strong><\/h3>\n\n\n\n

    Once your paperwork is processed, the court sends a document to every financial institution attempting to collect payment from you, telling them to stop. This is called an \u201cautomatic stay.\u201d An automatic stay can be quite helpful if you were at risk of wage garnishments due to your debts.<\/p>\n\n\n\n

    What happens when you work with a bankruptcy attorney?<\/strong><\/h3>\n\n\n\n

    After the automatic stay is in place, you\u2019ll continue to work with your lawyer to get all of your documentation together to complete the filing process. When you\u2019re working with the lawyer, it\u2019s extremely important that you\u2019re as transparent as possible and give them all of your financial information so they can submit it to the court. This is very important because withholding information can be deemed a criminal offense<\/a> by the bankruptcy court.<\/p>\n\n\n\n

    What happens in court when filing for Chapter 7 bankruptcy?<\/strong><\/p>\n\n\n\n

    After providing your lawyer with all of your financial information, you\u2019ll be required to go to court to meet with a trustee. This is typically a brief meeting, though it can vary by state. When meeting with the trustee, you\u2019re verifying that the information you\u2019re provided is correct. Then, your Chapter 7 bankruptcy requirements work their way through the courts, and you\u2019ll eventually receive a discharge. A discharge is when the debtor is released from liability of certain types of debts, and this takes roughly four to five months<\/a>.<\/p>\n\n\n\n

    Dischargeable debts<\/strong><\/h3>\n\n\n\n

    So, what debts can be erased or forgiven by Chapter 7 bankruptcy? Dischargeable debts are debts that are typically erased by filing for Chapter 7 bankruptcy. These debts can be forgiven because there are no bankruptcy laws that prevent them from being discharged.  <\/p>\n\n\n\n

    Dischargeable debts can include:<\/p>\n\n\n\n