Chapter 7 bankruptcy can provide a fresh start when debts are overwhelming, but it comes with long-term credit consequences. Learn how it works, who qualifies, what you can keep, and how it compares to other debt relief options.
Chapter 7 bankruptcy helps you get rid of debt quickly and affordably with legal protection from the court. Your unsecured and unmanageable debts like credit cards and medical bills can be discharged, meaning you no longer owe the debt—legally. You are able to keep exempt property, while non-exempt property will be sold by the court-appointed bankruptcy trustee to pay your creditors.
It is possible to reaffirm secured debts (like your mortgage or car loan) and continue to pay those. Chapter 7 is the fastest and often most affordable path to debt relief and a financial fresh start.
Chapter 7 bankruptcy is the legal process where your non-exempt assets are sold by the US trustee to pay back your creditors. The sale proceeds are distributed amongst your creditors and the amounts that remain unpaid are then discharged legally. You are no longer legally obligated to pay any amount of money to the debts that were discharged. Under Chapter 7 bankruptcy, you can get rid of debts within a few months of filing. Once you start the process, collection calls and activities stop.
In Chapter 7, you must hand over certain assets to the trustee, who sells them to repay debts. However, you can keep certain exempt assets. Examples:
Discharge of debts marks the end of the bankruptcy process. You receive a Notice of Discharge and cannot file again for 8 years. Here are examples:
| Dischargeable | Non-Dischargeable |
|---|---|
| Personal loans, credit cards, judgments, business debts, leases, negligence claims | Recent taxes, child/family support, intoxication auto claims, trust fund taxes, criminal fines, unscheduled debts, student loans, debts denied discharge previously |
