Chapter 7 Personal Bankruptcy

The primary purpose of a Chapter 7 Personal Bankruptcy is to discharge certain debts and to give an honest individual a “fresh start.”

As soon as the bankruptcy petition is filed, the court places an automatic temporary stay on current debts and stops creditors from collecting payments, garnishing wages, foreclosing on a home, repossessing property, evicting the debtor, or turning off their utilities.

Next, the court will take legal possession of the debtor’s property and appoint a trustee to administer the case. The trustee will set up a meeting of creditors where the debtor will answer questions about their debts and the nature of their property. The debtor is allowed to keep certain “exempt” property. Then, the trustee will use the debtor’s nonexempt assets to pay the creditors (holders of claims) in accordance with the provisions of the Bankruptcy Code. Most of the remaining debts will be discharged, with a few exceptions.

A Chapter 7 bankruptcy is the simplest, quickest, and most common form of bankruptcy, typically taking between 3 to 6 months to complete.