Chapter 7 is what most people think of when they think of bankruptcy. One of the main purposes of Chapter 7 is to discharge debts to give you a "fresh start." You have no liability for discharged debts. Most of my Chapter 7 clients never see a judge and keep everything they own--their home, their car, and their other assets.
In a Chapter 7 case, only individuals are eligible for a discharge; partnerships, corporations and LLCs can’t get one. Although an individual Chapter 7 case usually results in a discharge of debts, the right to a discharge is not absolute, and some types of debts are not discharged (domestic support obligations, recent taxes, and student loans are the major ones.)
To be eligible for Chapter 7 relief, you must first complete a process known as “means testing.” You also have to take a credit counseling course from an approved credit counselor. (This can be done online, rather than in person.) If you decide to file for Chapter 7, we can discuss these requirements before we move ahead with your case.
A Chapter 7 starts when your petition is filed with the U.S. Bankruptcy Court. Documents relating to income and expenses, debts, property (real property as well as personal property—your “stuff”), and other financial disclosures must be prepared and filed.
Though some people file for bankruptcy without a lawyer, I think that’s a big mistake. I’ve been a consumer bankruptcy lawyer for over thirty years and have seen even experienced attorneys who don’t regularly practice bankruptcy law mess up their client’s cases…badly. And it costs more to fix their mistakes (if they even can be fixed -- I've seen people lose their homes, jewelry, cars, and bank accounts) than it costs to do it right in the first place.
Bankruptcy is not for even the casual attorney. It's deceptively complex. It needs someone who regularly appears before the Bankruptcy Court, knows the trustees, and is familiar with both the written law and the unwritten law, rules, and local practice. We do.
The Automatic Stay that goes into effect once your Chapter 7 case is filed immediately stops most collection actions, including collection calls and letters, bills, foreclosures, lawsuits, garnishments, bank attachments, even IRS levies. There are things it doesn't stop, such as criminal cases and some child support actions. Under some circumstances the Automatic Stay may exist for only a short period of time.
About six weeks after the petition is filed, the case trustee will hold a meeting of creditors. You will need to attend that meeting, but don’t worry—I will be there with you, and you will be completely prepared to avoid any surprises. It isn’t a test, and only very rarely do creditors show up. Most of the time, the meeting of creditors lasts less than five minutes, and we even send you a list of the common questions that are asked beforehand!
The vast majority of my Chapter 7 clients never see the inside of courtroom (except for my DC clients, where the meeting of creditors is in a small courtroom, without a judge).
Your discharge, which will typically be handed down about four months after the case is filed, will release you from personal liability for most debts and prevent the creditors owed those debts from ever taking any collection actions against you. But the discharge is filled with exceptions, so it’s important for us to talk so I can help you learn what will, and what will not, be covered by your Chapter 7 discharge.