- A Chapter 7 bankruptcy is used in personal bankruptcy cases. According to uscourts.com, Chapter 7 bankruptcy is most often a "no asset" case which means the consumer does not have any assets that can be sold to pay a portion of the debt. The Chapter 7 bankruptcy will, ultimately, wipe out most of the consumers debt. There are some types of debt that cannot be discharged in a Chapter 7 case. These include child support, criminal restitution, most student loans and some taxes.
- To file for bankruptcy, a consumer must start the process by filling out a bankruptcy petition. The petition is used to list all of the person's debt, assets and expenses. A Trustee is assigned to the bankruptcy case. The Trustee will review the petition to determine whether the person qualifies for bankruptcy and will ensure correct procedure is being followed. A debtor must list 100 percent of his debt.
- Chapter 7 bankruptcy does not place a limit on the amount that can be discharged. The consumer must prove he does not have the income or assets to repay his debt, and, once this is achieved, the bankruptcy process will discharge 100 percent of dischargeable debt. The Chapter 13 bankruptcy process does put a cap on the amount of money that can be included in a bankruptcy, but a Chapter 7 bankruptcy does not. In some cases, a judge can prevent a debtor from filing Chapter 7 if his income exceeds a certain amount and may force the debtor into Chapter 13. A bankruptcy attorney can advise whether you qualify for Chapter 7 or Chapter 13.
- When debt is discharged in a Chapter 7 bankruptcy case, the creditor must write off the debt and cannot continue to attempt to collect the debt. Your accounts on your credit report will be updated to include the bankruptcy and all account balances should be changed to zero. A Chapter 7 bankruptcy discharge occurs approximately four months after the bankruptcy petition is filed.
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