Chapter 7 bankruptcy is a type of bankruptcy in the United States that generally focuses on liquidating (selling) a debtor’s non-exempt assets to pay creditors. After the process, many remaining eligible debts may be discharged, meaning you typically don’t have to pay them anymore. It’s often called “liquidation bankru
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What “Chapter 7” bankruptcy means
Chapter 7 bankruptcy is a type of bankruptcy in the United States that generally focuses on liquidating (selling) a debtor’s non-exempt assets to pay creditors. After the process, many remaining eligible debts may be discharged, meaning you typically don’t have to pay them anymore. It’s often called “liquidation bankruptcy.”
How it works (high level)
To file Chapter 7, you submit forms to the bankruptcy court and provide financial information. A trustee is appointed to review your case and, if applicable, sell non-exempt property. You may be required to attend a meeting of creditors (often called the 341 meeting). Whether you qualify can depend on a means test, which compares your income to the state median and considers certain expenses. Exemptions vary by state, and they determine what property you can usually keep.
Important considerations
Not all debts are dischargeable in Chapter 7 (for example, certain taxes, student loans in limited circumstances, child support, alimony, and debts from fraud or certain misconduct). Filing can affect credit and may have timing and eligibility limits (for example, prior bankruptcy discharge rules). If you’re considering bankruptcy, it’s often important to review your specific debt types, income, assets, and exemptions.
