What Is Chapter 7 Bankruptcy and How Does It Work?

Chapter 7 bankruptcy is often called “liquidation bankruptcy,” but for many individuals, it’s actually a fresh start. This type of bankruptcy allows eligible filers to eliminate most unsecured debts, such as credit cards, medical bills, and personal loans, typically within a few months.

The Chapter 7 process begins with filing a bankruptcy petition and financial disclosures with the court. Once filed, an automatic stay immediately stops most collection efforts, including lawsuits, garnishments, and creditor calls. A court-appointed trustee reviews the case and determines whether any non-exempt assets can be sold to repay creditors. In many cases, filers keep all of their property due to available exemptions.

To qualify for Chapter 7, you must pass the means test, which compares your income to your state’s median income and evaluates your ability to repay debts. If you qualify, most remaining eligible debts are discharged at the end of the case.

Understanding Chapter 7 can feel overwhelming, especially if you’re considering filing on your own. That’s why EasyBankruptcyCourse.com offers a simple, step-by-step online course to help you understand the process, avoid common mistakes, and move forward with confidence.