What Happens When You File Chapter 7

Bankruptcy Court

There are several different versions of bankruptcy. Chapter 7 is the most popular bankruptcy. What happens when you file Chapter 7? Read on to find out.

Chapter 7 Is A Liquidation Bankruptcy

The goal of Chapter 7 is to eliminate as much unsecured debt as possible. The tradeoff in this type of bankruptcy is something called “liquidation.”

If a bankruptcy filer has too much assets, the Bankruptcy Court has the authority to sell some of those assets for the benefit of the creditors. These are called “asset” bankruptcies. Asset bankruptcies are very rare for consumer cases.

In 99% of the cases that we file here, the bankruptcy filer does not lose any property whatsoever. These are called “no-asset” bankruptcies.

The bottom line is that the goal of a bankruptcy filer in Chapter 7 is to eliminate their debt. This happens at the end of a Chapter 7 when the court issues a “discharge.” The discharge excuses all debts except for the ones that cannot be discharged pursuant to bankruptcy law.

There Is One Court Appearance Required In Every Chapter 7

Each debtor in a bankruptcy case must appear in court one time. This is known as the “Meeting of Creditors.”

The bankruptcy trustee assigned to the case will place the debtor under oath and will proceed to ask questions about the bankruptcy case.

Think of the Meeting of Creditors as an interview. The role of the Trustee is to ensure that the bankruptcy filer is playing by the rules, telling the truth, and not hiding any income or assets.

While it is called a “Meeting of Creditors,” it is very uncommon for creditors to appear in consumer cases. In most situations, the Meeting of Creditors only lasts a few minutes — typically less than five for a simple consumer case.

The Automatic Stay Protects The Bankruptcy Filer From Creditors

The Automatic Stay is one of the most important parts of bankruptcy! The Automatic Stay prevents creditors from taking any further collection activity against the bankruptcy filer.

This means that Creditors cannot sue, call, harass, garnish, or levy the debtor while the bankruptcy case is pending. This gives the bankruptcy filer breathing room to sort through their financial issues.

The Automatic Stay can even halt a foreclosure or car repossession! For this reason, some Chapter 7 bankruptcy cases are filed as much for the protections of the Automatic Stay as much as for the discharge.

Please call my office at (916) 333-2222 if you are considering a Chapter 7 bankruptcy in Northern California. We can give you more information and schedule an in-office consultation to learn more about your situation. Dont’ delay!