Chapter 7 Bankruptcy

A summary of what's involved in a typical Chapter 7 bankrupcty.

1. Analyze your debt. Some debts, such as child support obligations, are not dischargeable in Chapter 7 bankruptcy. And if you pledged collateral for a debt, the creditor can take the property if the debt isn't paid.

2. Determine your property exemptions. Every state has exemption laws, which dictate what types of property (or, in some cases, how much equity in particular types of property) you are entitled to keep if you file for Chapter 7 bankruptcy.

3. Make sure you are eligible. If your average income during the six months before you file is more than the median income for a family of your size in your state, you may not be allowed to use Chapter 7, depending on your income and debts.

4. Redeem or reaffirm secured debts. If you pledged property as collateral for a loan, you'll need to pay something to the creditor if you want the right to keep the property. When you file for bankruptcy, you'll be asked to decide whether you want to "redeem" the property (pay the creditor the current replacement value of the property), "reaffirm" the debt (agree on new contract terms with the creditor), or "surrender" the property (let the creditor take it -- if the property is worthless, the creditor may not bother). Depending on where you live, there may be other options as well.

5. Fill out the bankruptcy forms. You complete a few dozen pages of forms, in which you tell the court about all of your property, debts, income, and expenses. You'll list the names of all your creditors, note which debts are disputed, decide what property you are claiming as exempt, and decide what you want to do about each of your secured debts.

6. File the forms. Filing your petition (the main bankruptcy form) officially starts your case. Most people file all the forms at once, but if you're in an emergency, you can file just a two-page form, and then file the complete set of the forms within 15 days.

7. Go to a meeting. In most cases, you'll need to go to court only once, for a short meeting with the trustee (and perhaps a creditor or two) to review your case and answer any questions about the information in your forms.

8. File objections or motions if needed. If you dispute a creditor's claim against you or you want to eliminate certain liens, you'll need to address these matters before your bankruptcy case is closed.

9. Wind up your secured debts. When you filed your bankruptcy forms, you completed a form in which you stated how you intended to handle your secured debts. Before your case is closed, you'll need to act on these matters.

10. Get your discharge. Congratulations! This is what it's all about. At the end of a successful bankruptcy, the court will issue an order saying that your dischargeable debts are officially discharged. Once a debt is discharged, you no longer have a legal obligation to pay it and the creditor has no legal right to demand it. 

Copyright 2005 Nolo

Client Reviews
★★★★★
I was provided with a free consultation and was given great advice. I would definitely recommend Chip Parker to anyone who needs assistance with financial law. Meagan
★★★★★
Chip's law firm helped me through the bankruptcy process with ease. The staff was always willing to answer questions and ensured that their answers were provided in a timely manner. A great firm to represent you. Kevin
★★★★★
Mr. Parker and Mr. DuFresne along with their staff went the full mile to help my wife and I through some tough financial difficulties. They take great pride in doing what thy do and I would recommend them to anyone. Robert
★★★★★
Chip Parker autographs his work with excellence. Finding an attorney with real integrity in today's world of law is not an easy task. Chip believes in balancing the scale of Justice and removes the blind fold so the injustices are clearly seen. Thanks for all the good you and your firm achieve. Joy
★★★★★
I took a very complex problem to Chip, and he spent a generous amount of time outlining specific options. Chip has an amazing ability to grasp the important issues and quickly narrow down the key points. He is the best person to have on your side. Phenie