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Bankruptcy Questions

What is Chapter 7 Bankruptcy?

Chapter 7 Bankruptcy is a type of bankruptcy that allows individuals or couples to discharge (eliminate) most of their unsecured debts, such as credit card debt and medical bills, by selling non-exempt assets. The proceeds from the sale are used to repay creditors, and any remaining qualifying debts are discharged.

Will I lose my home if I file bankruptcy?

Maybe not. As long as you are up to date on your payments, you should be able to keep your primary home in a Chapter 7 Bankruptcy. In a Chapter 13 Bankruptcy, even if you are behind on your mortgage, the Chapter 13 Plan should allow you to catch up on the amount that you are behind and allow you to keep your home.

Will filing a bankruptcy stop a foreclosure?

Yes. While the filing of a bankruptcy may stop a foreclosure, the foreclosure may proceed with Bankruptcy Court approval in a Chapter 7 matter if you are unable to become up to date with your mortgage payments. A Chapter 13 filing may stop a foreclosure altogether because the Chapter 13 Plan can allow for the arrearages in the mortgage to be paid over time, thus allowing you to save your home from foreclosure.

Will filing a bankruptcy stop creditor harassment and bill collectors from calling?

Yes. Upon filing the Automatic Stay as provided for the Bankruptcy Law requires that all collection efforts against you stop.

Will the filing of a bankruptcy end garnishments?
Yes. Garnishments are an effort to collect on a old debt and thus must stop upon the filing of the Bankruptcy Petition.

Is my spouse required to file bankruptcy with me?
No. While in many cases it is advantageous for you and your spouse to file a joint bankruptcy petition, it is not necessary. 

Who is eligible for Chapter 7 Bankruptcy?

To be eligible for Chapter 7 Bankruptcy, you must meet certain income requirements. Your income must be below the state median or pass the means test, which evaluates your income and expenses. Additionally, you must not have filed for Chapter 7 Bankruptcy in the past 8 years.

What is the means test?

The means test is a calculation that determines if your income is low enough to qualify for Chapter 7 Bankruptcy. It compares your income to the median income in your state for a household of your size. If your income is below this threshold, you usually qualify.

What debts can be discharged in Chapter 7?

Chapter 7 Bankruptcy discharges most unsecured debts, including credit card debt, medical bills, personal loans, and utility bills. However, some debts like student loans, child support, and certain tax debts are typically not dischargeable.

Will I lose all my assets in Chapter 7 Bankruptcy?

Not necessarily. Chapter 7 Bankruptcy allows you to exempt (keep) certain property. The exempt property varies by state and can include items like your primary residence, car, and personal possessions. Non-exempt property may be sold to repay creditors.

How long does a Chapter 7 Bankruptcy case take?

The process usually takes about 6 months. It involves filing the initial petition, attending a meeting of creditors, and, if necessary, liquidating non-exempt assets. After this, the Bankruptcy Court will issue the discharge, and the case will be closed.

Will my credit be ruined if I file for Chapter 7 Bankruptcy?

Bankruptcy will have a negative impact on your credit, but it is not permanent. The bankruptcy will remain on your credit report for up to 10 years, but you can start rebuilding your credit immediately after the discharge.

What is the automatic stay?

The automatic stay is a legal injunction that goes into effect as soon as you file for Chapter 7 Bankruptcy. It stops most collection actions, including creditor calls, lawsuits, and foreclosure proceedings.

Can I file for Chapter 7 Bankruptcy more than once?

You can file for Chapter 7 Bankruptcy again, but there are time limits. You must wait 8 years from the date of your previous Chapter 7 filing.

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