What Debts are Discharged in Chapter 7?
Chapter 7 will discharge most of your debts. You often want to keep some debts, like your car and your home. Bankruptcy will wipe out medical bills, credit cards, personal loans and similar debts.
Some debts are not discharged, like: student loans, child support, spousal support, most taxes, Court fines, and some other debts.
What Happens Once You File?
Once you file, you can’t back out! (BEWARE)
Filing a Chapter 7 commits your assets to the bankruptcy system irreversibly. This is important, because it means that if you, or your attorney, makes a mistake, you can’t dismiss the case. You’re stuck. See: https://www.abi.org/member-resources/blog/a-debtor-may-not-necessarily-have-his-chapter-7-case-dismissed
Regularly, I see assets lost because of a failure to properly detect a problem in a case. For example, not checking a lien date on a car purchased before filing could cause you to lose the car.
Failing to investigate and properly analyze seemingly small details can result in huge losses for Chapter 7 filers. That’s why it’s so dangerous to try to file without an experienced specialist. Bankruptcy is a specialty practice, not appropriate for general practice lawyers or novices. The U.S. Courts website advises against trying to file without an attorney. https://www.uscourts.gov/services-forms/bankruptcy/filing-without-attorney
If you have filed a prior Chapter 7 in the last 8 years, you are not eligible to get a discharge in Chapter 7. The date to focus on is the filing date, not the discharge date. If you have filed a previous Chapter 13, the look-back period is 6 years.
The Timeline for Filing Chapter 7
Generally, the Chapter 7 process can be completed in four to six months.
First, you will need to complete the petition. This is a long legal document best completed by your attorney, because getting it wrong can create serious, sometimes irreversible problems for you.
After the petition is completed, it is filed with the court, and your creditors are notified. Of the filing. The Automatic Stay is instantly created when your case is filed, stopping nearly all collection actions against you.
About 5 weeks later you and your attorney will meet with the trustee at what is called a section 341 meeting of creditors. Although creditors used to attend, that is a rare event these days. Generally it’s just you and your attorney. During the COVID-19 crisis, these meetings are being conducted by phone.
About 3 months after the 341 meeting, you will receive a one page “discharge” document, indicating that all your dischargeable debts are discharged. The case is closed within a few weeks of the discharge, in most cases.
In my practice this is the beginning of the credit rebuild process. We have a 12 month program to help our clients rebuild credit, step by step, so that the experience a true financial recovery. Not just a discharge of debt. Typical results are FICO scores of 650 – 700 within one year of the discharge.