Chapter 7 Bankruptcy

In Chapter 7 (“Liquidation bankruptcy”), debtors will surrender their property over to a case attorney. However, most if not all property can be protected from seizure. The case attorney will then convert the property surrendered to them into cash and will pay back the creditors. Most or all of debtors’ unsecured debts are discharged. Before filing bankruptcy, one should sit down with a competent bankruptcy attorney to determine if their property can be protected under a Chapter 7 bankruptcy.

To file for Chapter 7 bankruptcy, the debtor files a petition with the bankruptcy court serving the area where:

  • the debtor lives,
  • the business debtor operates the business, or
  • where the debtor has most of their assets.

With the petition, the debtor will file:

  • schedules of assets and liabilities,
  • current income and expenditures,
  • executory contracts and unexpired leases, and
  • a schedule of exempt assets

Bankruptcy forms can be purchased at a stationery store (they are not available from the court), or an attorney can help you prepare the forms.

Subject to change, the courts charge $306 in fees ($245 case filing fee, a $46 miscellaneous administrative fee, and a $15 trustee surcharge).

Once the Chapter 7 bankruptcy petition is filed, most legal actions are “stayed”, and most creditors cannot start or continue lawsuits, garnish wages, or even make telephone calls demanding payment. (Creditors are notified of the bankruptcy filing by the court clerk).

A meeting of creditors is generally held 20 to 40 days after the petition is filed. The debtor must attend the meeting, and the creditors may ask questions regarding the debtor’s financial affairs and property.

At the conclusion of the Chapter 7 bankruptcy process, the debtor is discharged. The debtor is no longer liable for discharged debts, and creditors are prevented from taking any action against the debtor. The laws regarding discharge are complex; therefore, we recommend that you consult a bankruptcy attorney prior to filing for Chapter 7 bankruptcy so that you fully understand the process.