Chapter 7 bankruptcy is a liquidation proceeding.  If you have any non-exempt assets, they’re sold by the Chapter 7 trustee and the proceeds are distributed to your creditors according to the priorities established in the Bankruptcy Code.  In nearly all consumer cases, all assets are exempt.  There are, therefore, no assets to liquidate and no money to give out to creditors. Chapter 7 is ordinarily the easiest and fastest form of bankruptcy.  It’s available to individuals, married couples, corporations and partnerships.

Before you’ll be able to file Chapter 7 bankruptcy you’ll have to pass means test.  The means test is a calculation that compares your average income for the last six months, annualized, to the average income for families of the same size in your state. If your income is less than or equal to the state average income, you “pass” the means test and may file Chapter 7 bankruptcy.

You Start by Filing a Chapter 7 Bankruptcy Petition

Your Chapter 7 bankruptcy is begun by filing the official petition, schedules and statement of financial affairs. These forms require you to list all of your assets and all of your debts, along with some recent financial history.  This is the most important and most time intensive part of a bankruptcy filing.

It’s important that you name all of your creditors with correct mailing addresses.  You must name all of your debts.  You must even list those debts that are’t dischargeable and those you plan to reaffirm.

You must likewise name all of your property, along with any debts secured by that property, and the sale value of the property.  “Property” as defined by the Bankruptcy Code means “assets” or “possessions.”  It’s not restricted to only real estate.

You must sign the schedules under penalty of perjury.  You then file the schedules with the bankruptcy clerk in the district in which you live. 

After you file your Chapter 7 bankruptcy petition, all the succeeding bankruptcy proceedings concern your situation as it existed on the date of filing.

The automatic stay goes in effect upon filing the petition.  The automatic stay produces a legal barrier to collection actions by creditors.  They can no longer contact you in an attempt to collect a debt.

The court then appoints a trustee and sends notice to all your creditors telling them that you’ve filed bankruptcy.  You’ll receive a copy of that notice simultaneously with the your creditors.

Initial Meeting of Creditors

You must appear at a meeting of creditors.  This is ordinarily called the section 341 meeting.  It takes its name from the section of the Bankruptcy Code that describes the meeting.  At the meeting of creditors, the trustee will ask you questions about your assets and liabilities.  Your answers are given under oath and carry the penalty of perjury.  Creditors can likewise question you about those subjects, but they rarely do so.

After The First Meeting of Creditors

If you own several non-exempt assets, the trustee will take charge of them. The trustee will sell the non-exempt assets and apply the income to the expenses of administering your case.  He’ll also dispense any left over money to creditors with allowed claims.  Each claim is assigned a priority according to the Bankrtupcy Code.  Those claims are paid off in order of the priority of the claims.  

The trustee may check out your income and expense schedule to find out whether you have sufficient money remaining after your actual living expenses to give something to creditors.  Any money you make after the case is begun is yours.  It’s beyond the touch of creditors who have dischargeable debts on the date of filing.

Ordinarily, the sole duty you have after the 341 meeting is to cooperate with the trustee by supplying whatever information he calls for.

Receiving A Discharge

The trustee and your creditors get a 60 day period of time following the 341 meeting during which they may challenge your right to a discharge in general or the dischargeability of a particular debt.  Unless a petition to deny your discharge is filed, the order providing the discharge of debts is released by the court soon after the 60 day period lapses.  If one creditor files a dispute to your discharge it doesn’t preclude or hold up the entering of a discharge of the rest of your debts.

As a precondition to your discharge, you must complete a financial training class from an authorized provider. The class ordinarily lasts for several hours.  Most authorized providers make online classes available. Your failure to attend the course and file a certificate of completion of the course of instruction may lead to your case being closed without entry of a discharge order. The court can charge you another filing fee to reopen the case, file the certificate and enter the discharge.

You can normally look for your discharge within 4-6 months of filing your case. The discharge touches dischargeable debts that existed at the commencement of your case.

Some debts do come through a Chapter 7 bankruptcy discharge.  They’re excluded from the discharge by law.  Those specified debts are taxes, child support, student loans, and liens.  If you reaffirm any debts they also survive the bankruptcy discharge.

Harvey L. Cox is a licensed attorney who runs a bankruptcy information site.  Please visit The Bankruptcy Info Center to get more quality bankruptcy information and tips.

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