Chapter 7 is the most common form of consumer bankruptcy. It eliminates most unsecured debts in about four months -- but you may have to give up certain property.
Chapter 7 is a liquidation bankruptcy governed by 11 U.S.C. Chapter 7. When you file, a court-appointed trustee reviews your assets, sells anything that is not protected by exemptions, and uses the proceeds to pay creditors. Once the process is complete, most remaining unsecured debts are wiped out through a discharge.
In practice, the vast majority of Chapter 7 cases are "no-asset" cases. That means the trustee finds nothing worth selling because everything the debtor owns falls within the allowed exemptions. The debtor keeps all of their property and still receives a discharge.
Not everyone can file Chapter 7. Under 11 U.S.C. Section 707(b), individual debtors must pass a means test that was added by BAPCPA in 2005.
The means test works in two steps:
The means test applies only to individuals with primarily consumer debts. Business entities (corporations, LLCs) can file Chapter 7 without a means test, but they do not receive a discharge -- the entity is simply liquidated.
A typical Chapter 7 case follows this timeline:
| Step | Timing |
|---|---|
| Credit counseling (required before filing) | Within 180 days before filing |
| File petition, schedules, and statements | Day 0 |
| Automatic stay takes effect (creditors must stop collections) | Immediately upon filing |
| 341 meeting of creditors | 21-40 days after filing |
| Debtor education course (required for discharge) | Before discharge |
| Deadline for creditors to object to discharge | 60 days after 341 meeting |
| Discharge entered | ~60-90 days after 341 meeting |
| Case closed | Shortly after discharge (or after asset distribution) |
From filing to discharge, a straightforward no-asset Chapter 7 case takes roughly 3 to 4 months.
Chapter 7 discharge under Section 727 eliminates most unsecured debts, including:
Certain debts survive a Chapter 7 discharge under Section 523(a):
Some of these nondischargeable debts -- including willful injury to property, certain divorce obligations, and government fines -- can be discharged in Chapter 13 through what is known as the super discharge. This is one reason some debtors choose Chapter 13 over Chapter 7.
Exemptions protect certain property from the trustee. The available exemptions depend on your state. Most states allow you to protect:
Some states allow you to choose between state exemptions and federal exemptions under 11 U.S.C. Section 522(d). Others require you to use the state exemption scheme.
If you received a Chapter 7 or Chapter 11 discharge within the past 8 years, Section 727(a)(8) bars you from receiving another Chapter 7 discharge. The 8-year period is measured from filing date to filing date.
Filing a Chapter 7 case inside the 8-year window does not prevent you from filing -- it prevents you from getting a discharge. You go through the entire process, the trustee reviews your assets, and at the end you get nothing. Your attorney should check your filing history before filing a new case.
A related provision, Section 727(a)(9), bars Chapter 7 discharge if you received a Chapter 13 discharge within the past 6 years (unless you paid 100% of unsecured claims, or 70% in good faith with best-effort payments).
Not sure if a discharge bar applies to you?
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