In a Chapter 7 Bankruptcy Filing, all unsecured debts, with a few exceptions, are eliminated. Unsecured debts such as credit cards and medical bills are eliminated, leaving only secured debts such as homes, cars, furniture, electronics, etc. to be reimbursed.

In a Chapter 7 filing, individuals may retain possession of their property and debts are usually repaid to secured creditors. Alternatively, the debtor can return the secured property to the creditor and not reaffirm the debt or pay the debt.

A typical Chapter 7 bankruptcy filing lasts about 6 months, in which at the conclusion, the debtor receives a discharge of all debts listed in the court petition.

Exceptions to Unsecured Debts

Certain unsecured debts in a Chapter 7 filing are exempt from discharge. These unsecured debts include certain taxes, student loans, child support, alimony, debts as a result of fraud, and debts as a result of a drug or drunk driving conviction.

Chapter 7 Bankruptcy Qualifications

Qualification for Chapter 7 protection is based on means testing outlined in the Bankruptcy Reform Act of 2005 and equity in personal and real property. To qualify for Chapter 7 bankruptcy, your income must be below the medium income line of the current year. If it is, you may qualify for Chapter 7 protection.

If your income is above the median income, you may still be able to qualify for Chapter 7 bankruptcy protection. Under the means testing model, certain deductions, based on the number of people in the household, may be taken for housing, food, clothing, etc.. If these deductions place you under the median income, you will also qualify for Chapter 7 protection.


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