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Chapter 7 bankruptcy is a liquidation proceeding.  If you have some 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 normally the simplest 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 households of the comparable 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 Begin by Filing a Chapter 7 Bankruptcy Petition

Your Chapter 7 bankruptcy is initiated by filing the official petition, schedules and statement of financial affairs. These forms require you to name 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 crucial that you name each of your creditors with correct mailing addresses.  You must name all of your debts.  You must even name those debts that are’t dischargeable and those you plan to reaffirm.

You must also list all of your property, along with any debts guaranteed by that property, and the sale value of the property.  “Property” as defined by the Bankruptcy Code signifies “assets” or “possessions.”  It’s not confined 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 reside. 

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

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

The court then names a trustee and mails 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.

First Meeting of Creditors

You must appear at a meeting of creditors.  This is commonly 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 responses are given under oath and carry the penalty of perjury.  Creditors can likewise question you about those topics, but they rarely do so.

After The First Meeting of Creditors

If you own any 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 leftover 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 ascertain whether you have enough money left over after your actual living expenses to give something to creditors.  Any money you make after the case is commenced is yours.  It’s beyond the touch of creditors who have dischargeable debts on the date of filing.

Normally, 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 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 allowing the discharge of debts is issued by the court shortly after the 60 day time period goes by.  If one creditor files a dispute to your discharge it doesn’t preclude or hold the entry of a discharge of the remainder of your debts.

As a stipulation to your discharge, you must complete a financial training class from an approved provider. The class ordinarily lasts for several hours.  Most official providers have online courses available. Your failure to attend the course and file a certificate of completion of the class may result in your case being closed without the entering of a discharge order. The court may charge you another filing fee to reopen the case, file the certificate and enter the discharge.

You can ordinarily expect your discharge within 4-6 months of filing your case. The discharge touches dischargeable debts that existed at the beginning of your case.

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