Chapter 7 Bankruptcy Explained

by Lynnette Khalfani-Cox, The Money Coach

in Bankruptcy

Chapter 7, also known as “liquidation” or “straight liquidation,” is typically the simplest and fastest form of bankruptcy.

Individuals, married couples and businesses can use Chapter 7 bankruptcy protection to wipe out all unsecured debts, completing eliminating financial obligations such as:

  • * credit card debt
  • medical bills
  • * collection accounts
  • * civil judgments
  • * back rent
  • * overdue utilities
  • * payday loans
  • * various personal/consumer loans

However, filing Chapter 7 bankruptcy will not eliminate some debts. These include: most back taxes, student loans, as well as court-ordered alimony and child support.

Ever since bankruptcy reform legislation passed in 2005, individuals have had to go through credit counseling, and pass an “income test” and a “means test” in order to qualify for Chapter 7.

If you do not meet the qualifications for Chapter 7, you will be shifted from Chapter 7 into Chapter 13 bankruptcy for a five-year repayment.

Lawyers also often advise people trying to prevent foreclosure and individuals who have secured assets that they want to keep (like a home, car or boat) to file Chapter 13 bankruptcy, instead of Chapter 7.


Related Questions:

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  • what is chapter 7 bankruptcy explained
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Lynnette Khalfani-Cox, The Money Coach

Personal Finance Expert and Co-Founder at Ask The Money Coach.com
Lynnette Khalfani-Cox, The Money Coach is a personal finance expert, speaker, and author of numerous books on personal finance. She appears frequently as an expert commentator on television, radio and in print.

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