How to File Bankruptcy Chapter 7: Understanding Bankruptcy Basics, Debt Discharge, and Impact on Credit

Are you struggling under a mountain of debt? Have high interest rates and late fees made it impossible to keep up with your bills? If so, filing for Chapter 7 bankruptcy may provide the fresh start you need.

Bankruptcy wipes your slate clean by discharging many types of debt, stopping creditors from pursuing you, and giving you a chance to rebuild your finances. Chapter 7 is the most common form of bankruptcy for consumers.

This comprehensive guide covers everything you need to know about filing Chapter 7, from the bankruptcy basics to step-by-step instructions for the process.

What Is Chapter 7 Bankruptcy?

Chapter 7 bankruptcy, also called liquidation bankruptcy, allows you to wipe out many unsecured debts like credit cards, medical bills, personal loans, and utility bills. Any nonexempt assets you own will be sold or turned over to pay creditors.

The bankruptcy trustee liquidates (sells) your nonexempt assets and distributes the proceeds to creditors. After the bankruptcy case ends, your dischargeable debts will be erased. Collection efforts and lawsuits over discharged debts are prohibited.

Do You Qualify for Chapter 7 Bankruptcy?

Not everyone qualifies to file for a Chapter 7 bankruptcy. According to the U.S. Bankruptcy Code, you must meet specific requirements related to income, expenses, types of debts owed, and property ownership. Some key requirements for filing Chapter 7 include:

  • Passing the Chapter 7 Means Test – The bankruptcy law requires you to qualify based on income limits in your state. If your income is below the state median, you automatically pass. If above, then the court will assess whether you have enough disposable income left each month after paying necessary living expenses. If not, you pass the means test.
  • Obtain Credit Counseling – You must receive credit counseling from an approved agency within 180 days before filing Chapter 7. The counseling session discusses bankruptcy alternatives.
  • Previous Bankruptcy Filing – You can’t file for Chapter 7 bankruptcy again for 8 years after receiving a Chapter 7 discharge. You must wait 4 years to file after a Chapter 13 discharge.
  • Meeting the Good Faith Filing Requirement – Courts review filings to ensure you are filing Chapter 7 in good faith and require honesty about income, expenses, assets and other details.

You can voluntarily file for bankruptcy protection under chapter 7 as long as you meet the legal qualifications. But first, you’ll need to complete some important steps.

What Debts Are Discharged in Chapter 7 Bankruptcy?

Many common unsecured debts are discharged in Chapter 7, including:

  • Credit card debt
  • Medical bills
  • Personal loans
  • Unpaid utility bills
  • Debt owed to friends or family

Debts that generally aren’t discharged include alimony, child support, student loans, unpaid taxes, fines, and some secured debts.

How to File Chapter 7 Bankruptcy

Filing Chapter 7 bankruptcy involves gathering paperwork, completing forms, attending a credit counseling session, and appearing at a court hearing. Here is an overview of what’s involved:

  1. Consult with a Bankruptcy Attorney – Hiring a qualified local bankruptcy lawyer is highly recommended to assist with the entire bankruptcy process. An attorney can advise if you qualify for Chapter 7, complete your bankruptcy forms, file them properly, and represent you in bankruptcy court.
  1. Complete the Bankruptcy Petition Forms – The bankruptcy forms include detailed financial information and are complex. Your attorney can help gather the required documents and accurately fill out your chapter 7 bankruptcy petition forms.
  1. File the Completed Forms – Once complete, your attorney will file the petition, schedules, statements, and other completed forms to the bankruptcy court to open your Chapter 7 case. There is a $335 filing fee unless you qualify for a fee waiver.
  1. Attend the 341 Meeting – You must attend the 341 meeting, where the Chapter 7 trustee and creditors can ask questions about your finances under oath. Your lawyer will go with you.
  1. Attend Creditor’s Meeting – If creditors want to review your case further, they can force you to attend a creditor’s meeting. Your lawyer handles objecting to any inappropriate challenges.
  1. Complete Required Debtor Education Course – After filing, you must finish a debtor education course and submit a certificate of completion to the court.
  1. Receive Your Discharge – If there are no issues, the court will issue your Chapter 7 discharge within 60-90 days after filing. Some debts may not be discharged.

What Are the Pros and Cons of Filing Chapter 7 Bankruptcy?


  • Stop debt collection calls and lawsuits immediately
  • Discharge credit card balances and other debts
  • Keep exempt property like your home, car, and retirement funds
  • Rebuild your credit a few years after bankruptcy


  • Bankruptcy stays on your credit report for 10 years
  • You may have to give up nonexempt property
  • Not all debts are wiped out (student loans, taxes, etc.)
  • It costs money to file, and you’ll need a lawyer.

For many people, the advantages far outweigh the drawbacks. Talk to a bankruptcy attorney about your unique situation.

How Much Does Filing Chapter 7 Bankruptcy Cost?

The court filing fee for Chapter 7 is $338. You’ll also have attorney fees of $1,500-$3,000, the pre-filing credit counseling course ($50 online), and potentially other costs like filing your tax return.

If you can’t afford to pay the filing fee in full upfront, you can ask to pay it in installments. Low-income individuals may request a fee waiver.

Does Filing Bankruptcy Impact Your Credit?

Chapter 7 bankruptcy will stay on your credit report for 10 years. Your credit score will drop significantly after filing. The impact diminishes over time, however.

Most people can start rebuilding credit a year or two after bankruptcy by getting and responsibly using a secured credit card. Obtaining a car or home loan is possible a few years after filing.

Can You Keep Your Home If You File Bankruptcy?

In many cases, yes! Laws allow you to exempt a certain amount of home equity from liquidation during bankruptcy. If you have significant equity, some of it may have to be paid to creditors.

Your home will be protected if you’re current on the mortgage and want to keep the house. Bankruptcy stops foreclosure and can eliminate mortgage arrears through a Chapter 7 discharge.

What is the difference between Chapter 7 and Chapter 13 bankruptcy?

The main difference between Chapter 7 and Chapter 13 bankruptcy is how your debts are handled. In Chapter 7, most of your debts are discharged, meaning you are no longer legally obligated to pay them. In Chapter 13, you create a repayment plan to pay off some or all of your debts over a period of three to five years.

When Should You Consider Bankruptcy?

Here are some signs it may be time to look into bankruptcy:

  • You use credit cards to pay living expenses
  • Debt collector calls are a daily occurrence
  • You’ve missed multiple mortgage or car payments
  • Medical bills make up a large portion of your debt
  • You’ve tapped everything you can to stay afloat

The journey towards financial recovery often requires making tough decisions. Bankruptcy, while a significant step, can sometimes be the best option to reset and rebuild your financial future. Don’t wait until you’re faced with dire consequences like wage garnishment or home foreclosure. Proactive decisions can prevent further financial degradation and provide a fresh start.

If you’re unsure about the next steps or need professional guidance, reach out to a trusted legal advisor. Consider partnering with a reputable firm like Ware Law Firm, PLLC in Mississippi. Their expertise can guide you through the complexities of bankruptcy and help you pave the way for a brighter financial future.

What Are Some Alternatives to Chapter 7 Bankruptcy?

If you don’t want to or can’t file Chapter 7, other options include:

  • Credit counseling – A non-profit agency helps you manage debt through lower payments, waived fees, and reduced interest rates.
  • Debt settlement – The creditor or debt settlement company agrees to let you pay a smaller amount to eliminate the debt.
  • Chapter 13 bankruptcy involves a 3-5 year repayment plan to catch up on debt through wage garnishment reductions and more. Your assets aren’t liquidated.
  • Debt consolidation loan – Combines all unsecured debts into one payment. This lowers monthly payments but increases the total interest paid.

For most people struggling with high, unmanageable debt, however, chapter 7 bankruptcy is the most powerful solution. Speak with a local bankruptcy attorney to discuss your debt relief options.

Frequently Asked Questions:

Q: Do I need to take credit counseling before filing for Chapter 7 bankruptcy?

A: Yes, before filing for Chapter 7 bankruptcy, you must complete a credit counseling course from an approved credit counseling agency. This requirement ensures that you explore other options besides bankruptcy and understand the implications of filing.

Q: How long does Chapter 7 bankruptcy take?

A: The Chapter 7 bankruptcy process usually takes three to six months. This includes the time it takes to complete the necessary forms, attend the required bankruptcy hearings, and receive the bankruptcy discharge.

Q: Will filing for Chapter 7 bankruptcy stop all collection actions against me?

A: Filing for Chapter 7 bankruptcy triggers an automatic stay, which halts most collection actions against you. This means that creditors must stop attempts to collect debts, including lawsuits, garnishments, and phone calls.

Q: Can I file for Chapter 7 bankruptcy more than once?

A: Yes, you can file for Chapter 7 bankruptcy more than once, but certain restrictions exist. If you previously received a Chapter 7 discharge, you must wait eight years from the date of your previous filing before filing for Chapter 7 again.

Key Takeaways – Chapter 7 Bankruptcy

  • Chapter 7 bankruptcy discharges many common unsecured debts
  • To file, you must qualify by passing the means test and meeting other requirements
  • A bankruptcy attorney guides you through the entire process
  • Most nonexempt assets will be sold or surrendered
  • You must complete pre-filing credit counseling and debtor education
  • Bankruptcy provides a fresh start but stays on your credit report for 10 years

If you’re struggling with high-interest rates, falling behind on bills, and creditors calling – talk to a local bankruptcy lawyer immediately. They can help determine if Chapter 7 is your best path to no longer owing certain debts and rebuilding your financial life.

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