The Chapter 7 bankruptcy process allows debtors to discharge certain unsecured debts, including medical bills and credit card debt. Other secured debts, such as student loans, certain IRS tax debts, and spousal and child support debts are not discharged (exceptions exist for student loan debt). If you are in a financial crisis filing Chapter 7 bankruptcy may be an option, but there are certain long-term considerations which should be understood before making this decision. Recently on our bankruptcy forum a user asked, “If I decide to file Chapter 7 bankruptcy what is the Chapter 7 bankruptcy process?”
Chapter 7 Bankruptcy Process
1. Determining whether you qualify for Chapter 7 Bankruptcy
Bankruptcy laws were changed in 2005, making it much more difficult for many filers to have their debts immediately discharged. Debtors whose income is too high or who have too much disposable income will not qualify for Chapter 7 Bankruptcy. Talk to a bankruptcy lawyer about the Chapter 7 means test and discuss your options. If you do not qualify for Chapter 7 bankruptcy you may be able to file Chapter 13 bankruptcy and repay a portion of your debts over a 3 or 5 year period.
2. Take a credit counseling course
The second step in the Chapter 7 Bankruptcy process is to take a court approved credit counseling course. To find a full list of approved credit agencies visit the Justice Department website. On this site you can enter the name of your state and it will provide a full list of agencies.
The credit counseling course must be taken within the 180-day period before you file your bankruptcy. The completion form must be filed with the court no later than 15 days after your bankruptcy filing date.
3. Complete the bankruptcy petition and schedules
The third step in the Chapter 7 Bankruptcy process is to complete the bankruptcy petition and bankruptcy schedules. This can be done without legal assistance, but many filers who have property they want to keep or who need help filing the forms may want to talk to a bankruptcy lawyer.
All the Chapter 7 bankruptcy forms can be downloaded from the United States Courts Website. This website has a link for all the forms and instructions you will need to complete for the Chapter 7 Bankruptcy process. The forms must be completed accurately and submitted to the appropriate bankruptcy court.
4. Trustee appointed to your bankruptcy case
After the bankruptcy petition is submitted to the court, the court will appoint a trustee. The trustee examines all of the bankruptcy forms and looks for nonexempt property to sell for the benefit of creditors. Next, a creditor’s meeting will be held. This meeting allows creditors to ask questions about the bankruptcy.
5. Receive Chapter 7 bankruptcy discharge
If there are no objections to the bankruptcy the court will issue an order saying that your unsecured, dischargeable debts are officially discharged. After the discharge you will have no legal obligation to repay the discharged debts.
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