Chapter 7

Chapter 7 bankruptcy is commonly called “fresh start” bankruptcy. It is cheapest and quickest form of bankruptcy. In chapter 7, also called liquidation, the goal is usually to eliminate or discharge as much unsecured debt as possible. Unsecured debt includes credit cards, medical bills, loans with no collateral, and repossessed vehicles.

A chapter 7 starts when you prepare and file your petition. Before you file a petition, you will have to go to credit counseling. You will also have to take a debt management course after you file your case but before you can finish and receive your discharge. Once your petition is filed, the “automatic stay” goes into effect. The “automatic stay” is the part of the bankruptcy law that protects you from creditors. This means that once your case is filed, your creditors can no longer harass you, call you, sue you, garnish your check, or take your property.

In most chapter 7 cases you can keep your home and automobiles. If you are still paying for a home, auto, or furniture, you will have to keep paying the debt IF you want to keep the collateral. You always have a right to surrender property such as a house or car and the debt goes away.

Some debts cannot be discharged in bankruptcy. Student loans, child support, and most taxes are nondischargeable. There are some other debts that cannot be discharged. After you file a chapter 7, you will have to attend a meeting of creditors. You will also have to show identification and provide proof of income in the form of pay stubs and tax returns.

Chapter 7 is an affordable and quick way to deal with oppressive debt, however, sometimes chapter 7 does not provide the bankruptcy help you may need. In those cases, chapter 13 bankruptcy might offer a solution.