Chapter 7 is a "liquidation" bankruptcy.  In a Chapter 7, the trustee assigned to your case may sell your nonexempt assets, and the proceeds of the sale are used to pay your creditors.  Exemptions are provided to you under State and Federal laws, such as Florida's homestead exemption provided by the Florida Constitution.  In most Chapter 7 cases, all assets are protected by exemptions.  In these "no asset" cases, you keep all of your assets, you receive a discharge, and the case is closed without a distribution to creditors.

The Chapter 7 Process

A Chapter 7 case begins with a consultation with your attorney, who reviews your financial situation and advises you about the different bankruptcy chapters available, as well as any alternatives to bankruptcy that might work for you.  Your attorney can also tell you if you are eligible to receive a discharge, and which of your debts can and cannot be discharged. 
Following the changes to the bankruptcy laws in October 2007, people with mostly consumer debts who want to file under Chapter 7 must use a 'means test' to determine whether they are able to pay creditors.  The means test looks at your disposable monthly income and the amount of your unsecured debt.  If the means test determines that your income allows you to pay your creditors, you will have to file under Chapter 13, unless you can show the court that in your situation, filing under Chapter 7 is not an abuse of the bankruptcy laws.

If you decide to file for protection under Chapter 7, your attorney will prepare your petition, schedules containing your assets, debts, income and expenses, and a "statement of financial affairs."  Before filing, you must review and sign these documents.  Also, within 180 days before you file, you must complete credit counseling, which may be done on the internet or by telephone.  The certificate of completion must be filed with your petition, or your case may be dismissed.  After the case is filed, you must take a personal financial management class, which also may be done on the internet or by telephone.  Your attorney can provide you with contact information for agencies who provide credit counseling and financial management classes. The filing fees for a Chapter 7 are $299.00.

After your Chapter 7 petition is filed, your case is assigned to a trustee, and your creditors are mailed a notice from the court advising them that you have filed a Chapter 7 bankruptcy case.  The notice advises your creditors that the automatic stay is in effect, and that they may be penalized for further attempts to collect a debt or for taking any other action in violation of the Bankruptcy Code.  Finally, the notice includes the date and place for your meeting of creditors, which will be from four to eight weeks from the day you file.  You and your attorney will attend the meeting of creditors, which is run by your trustee and is not held in a courtroom.  At the meeting, the trustee asks you questions about your bankruptcy.  The meeting usually takes only a few minutes, and although your creditors are allowed to come and question you, they rarely attend.  The bankruptcy judge is not allowed to attend your meeting of creditors, and in fact, most people go through Chapter 7 bankruptcy without ever going to court and seeing the judge.

If no objection to your discharge is filed, then approximately sixty days after your meeting of creditors, the clerk of the court will mail your notice of discharge to you.  The discharge means that you do not have to pay any of your discharged debts, and creditors cannot try to collect the discharged debt.  Not all debts are discharged.  For example, some types of taxes, student loans, alimony and child support, criminal fines and restitution,and debts for personal injury as the result of alcohol or drug use are not discharged.  Your attorney will advise you as to which of your debts may not be discharged.

I hope this outline of the Chapter 7 process has been helpful to you.  It has been provided as general information, and is not intended to be legal advice.  If you would like to schedule a consultation with me in Boca Raton, Palm Beach Gardens, or West Palm Beach, please see my contact information, or send an e-mail to me here.