Filing a Chapter 7 Bankruptcy: Basic Steps

If you’re thinking about filing for Chapter 7 bankruptcy, here's an overview of what you'll need to do.

By , Attorney

Filing for Chapter 7 bankruptcy is a big decision, but the process is predictable. If you want to know what to expect or how to file for Chapter 7 bankruptcy, this article is an excellent place to start. You'll learn:

  • the nine steps involved in filing bankruptcy, and
  • how to find more information about a Chapter 7 bankruptcy case.

Once you understand the bankruptcy filing process, you'll be ready to learn whether you can keep your property and erase your debts in Chapter 7. You'll find links to helpful resources at end of the article.

1. Analyze Your Debt: Can You Erase Your Bills By Filing Bankruptcy?

Not all debts go away in Chapter 7. Here are some of the debts you'll be able to "discharge" or erase in Chapter 7 bankruptcy:

  • credit card balances
  • medical bills
  • electric, gas, cable, and phone bills
  • personal and payday loans
  • apartment and car leases, and
  • gym memberships and other dues.

Examples of "nondischargeable" debts that will remain after filing Chapter 7 bankruptcy include:

Also, it's common to pledge a house or car as collateral when taking out a mortgage or car loan and create a "secured debt." You should know that you'll lose the property if you aren't current on the loan when filing a Chapter 7 bankruptcy and if you don't remain current after your case. Find out if Chapter 7 bankruptcy is the right choice for you.

2. Determine Your Exemptions: Can You Keep Your Property When Filing Chapter 7 Bankruptcy?

Exemption laws tell you what you can protect if you file for Chapter 7 bankruptcy. Most people can keep the following:

  • household furniture and appliances
  • bedding and kitchenware
  • clothing and prescribed medical devices
  • some tools needed for your business
  • ERISA-qualified retirement accounts, and
  • some equity in a car and home.

Find out more about how bankruptcy exemptions work and your state's bankruptcy exemption list. It's important because understanding this area will keep your possessions safe.

3. Make Sure You're Eligible: Is Your Income Low Enough to File for Bankruptcy?

Unless most of your debt is from a business venture or you're a qualifying military member, you'll have to take and pass the Chapter 7 means test. Here's what you'll do:

  • calculate your gross income during the six months before filing
  • double it, and
  • compare it to the average gross income in your state for your family size you'll find the figures on the U.S. Trustee Program website).

If your gross income is at or below that figure, you'll qualify. If you don't pass, you'll have a second chance to deduct allowed expenses from your income. If enough remains to repay a meaningful amount to creditors, you still won't be eligible and need to look to Chapter 13 for debt relief. If nothing's left for creditors, you'll qualify for Chapter 7.

Other qualification requirements also exist. For instance, you might need to delay filing for bankruptcy to comply with the multiple bankruptcy filing waiting period rules.

4. Take a Credit Counseling Course

Individuals filing for Chapter 7 bankruptcy must complete a course before filing or, in highly unusual cases, shortly after. You can take the class online or by phone up to 180 days before filing bankruptcy. Here's where you'll learn more about the prebankruptcy credit counseling requirement.

5. Fill Out and File the Chapter 7 Bankruptcy Forms

You'll tell the court about your property, debts, income, expenses, and more on Chapter 7 bankruptcy forms. When finished, you'll have disclosed everything about your present and past financial situation, including whether you want to keep your car, house, and other secured property or let it go back to the lender. You'll also disclose property transactions that occurred up to ten years before your case.

Your case starts after filing the completed bankruptcy forms (the "petition"). Because a bankruptcy filing can be up to 60 pages in length, you can use the emergency filing procedure if you're short on time—it requires fewer forms. If you don't file the remaining forms within 14 days, the bankruptcy court will dismiss your case.

You'll also pay a filing fee. If you can't pay it, you can ask the court to split it into four payments or waive it entirely. Your household income must be 150% of the federal poverty guidelines or less, and you can't have sufficient income to pay in installment payments. Learn more about bankruptcy filing fees and costs.

6. Submit Documents to the Chapter 7 Bankruptcy Trustee

You'll prove the accuracy of your bankruptcy petition information by providing the Chapter 7 trustee appointed to your case with financial documents. You can find out why the trustee will want bank statements, paycheck stubs, profit and loss statements, tax returns, and more by reading about the financial paperwork needed for proof in bankruptcy.

7. Meet With the Chapter 7 Bankruptcy Trustee

The trustee will check identification at the 341 meeting of creditors in Chapter 7 bankruptcy—although your attorney might do so if it's a virtual meeting—and ask questions about your financial affairs. Creditors can come to the meeting, but they rarely do. However, creditor attendance is up because the virtual meetings required for social distancing are cheaper to attend than in-person meetings.

8. File Needed Objections and Motions

If you dispute a creditor's claim against your case or want to eliminate liens in Chapter 7, you'll address these matters before your bankruptcy case is closed. Motions aren't needed in most cases, and if you forget to handle a lien, the court will likely let you reopen your bankruptcy case later.

9. Complete a Debtor Education Course

Before receiving your discharge order wiping out your debt, you must finish the second "debtor education" course. If you don't submit your certificate on time, the court will dismiss your case without issuing a discharge. Fixing this problem can be expensive because you'll likely have to file a motion and pay another bankruptcy filing fee. Learn more about credit and debt counseling in bankruptcy.

That's It!

Expect to feel a weight lift from your shoulders after completing the steps involved with filing Chapter 7 bankruptcy because the order discharging qualifying debts wipes them out in Chapter 7 bankruptcy. Creditors won't be able to bother you any longer.

Need More Bankruptcy Help?

Did you know Nolo has been making the law easy for over fifty years? It's true—and we want to make sure you find what you need. Below you'll find more articles explaining how bankruptcy works. And don't forget that our bankruptcy homepage is the best place to start if you have other questions!

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Helpful Bankruptcy Sites

Department of Justice U.S. Trustee Program

United States Courts Bankruptcy Forms

We wholeheartedly encourage research and learning, but online articles can't address all bankruptcy issues or the facts of your case. The best way to protect your assets in bankruptcy is by hiring a local bankruptcy lawyer.

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