Chapter 7 Bankruptcy: A Fresh Start for Debt Relief

Published on February 12, 2025 by Casey Yontz, Bankruptcy Attorney

What Is Chapter 7 Bankruptcy?

Chapter 7 bankruptcy is a legal process designed to provide individuals and families with a **fresh financial start** by eliminating most unsecured debts. If you're facing overwhelming bills, wage garnishment, or creditor harassment, Chapter 7 may be a solution to help you regain control.

Unlike **Chapter 13 bankruptcy**, which requires a repayment plan, Chapter 7 **eliminates qualifying debts** entirely. This is why it's commonly referred to as **"liquidation bankruptcy."** However, most filers can keep their essential property under bankruptcy exemptions.

Who Qualifies for Chapter 7 Bankruptcy?

Not everyone is eligible for Chapter 7 bankruptcy. To qualify, you must pass the **"Means Test,"** which determines whether your income is **low enough** to file under Chapter 7.

✅ Your income must be below the **median household income** in your state.
✅ If your income is higher, you may still qualify if you have significant **deductible expenses** (like rent, medical bills, or child support).
✅ You must not have filed for **Chapter 7 bankruptcy in the past 8 years.**
✅ You must complete **credit counseling** from an approved agency before filing.

What Debts Can Be Discharged?

Chapter 7 bankruptcy eliminates **most** unsecured debts, but not all.

✅ Dischargeable Debts

Credit card balances
Medical bills
Personal loans
Utility bills
Past-due rent
Some lawsuit judgments

❌ Non-Dischargeable Debts

Student loans (except in rare cases)
Child support & alimony
Recent tax debts
Government fines & court fees
Debts from fraud

The Chapter 7 Bankruptcy Process

Filing for Chapter 7 bankruptcy typically takes **3 to 6 months** and involves several key steps:

Pre-filing Credit Counseling: A mandatory session with an approved credit counselor.
Filing the Petition: Submitting official bankruptcy forms with a list of debts, assets, and income.
Automatic Stay: Once filed, creditors must **immediately stop** collection actions.
341 Meeting of Creditors: A brief court meeting where a trustee reviews your case.
Debt Discharge: If approved, your qualifying debts are **eliminated permanently.**

Pros and Cons of Filing Chapter 7

✔️ Pros

Eliminates most debts
Stops creditor harassment
Process is relatively fast
Gives a fresh financial start

❌ Cons

May lose non-exempt assets - Rare if you hire an experienced lawyer
Stays on credit report for 10 years
Can’t file again for 8 years

Get a Free Bankruptcy Consultation

If you're considering Chapter 7, speaking with an **experienced bankruptcy attorney** can help you make the right decision.

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