Filing a Chapter 7 Bankruptcy: Basic Steps

A summary of what's involved in a typical Chapter 7 bankruptcy.

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

1. Analyze your debt.
Some debts, such as child support obligations, are not dischargeable in Chapter 7 bankruptcy. And if you pledged collateral for a debt, the creditor can take the property if the debt isn't paid. (Find out more in When Chapter 7 Bankruptcy Isn't the Right Choice.)

2. Determine your property exemptions.
Every state has exemption laws, which dictate what types of property (or, in some cases, how much equity in particular types of property) you are entitled to keep if you file for Chapter 7 bankruptcy. (To learn more, see Bankruptcy Exemptions.)

3. Make sure you are eligible.
If your average income during the six months before you file is more than the median income for a family of your size in your state, you may not be allowed to use Chapter 7, depending on your income and debts. (Learn more about eligibility for Chapter 7.)

4. Redeem or reaffirm secured debts.
If you pledged property as collateral for a loan, you'll need to continue to pay the creditor if you want to keep the property. When you file for bankruptcy, you'll be asked to decide whether you want to "redeem" the property (pay the creditor the current replacement value of the property), "reaffirm" the debt (agree on new contract terms with the creditor), or "surrender" the property (let the creditor take it). Depending on where you live, there might be other options as well. (Learn more about your options for secured debts in Chapter 7.)

5. Fill out the bankruptcy forms.
You'll complete a few dozen pages of forms, in which you tell the court about all of your property, debts, income, expenses, and prior transactions. You'll list the names of all your creditors, note which debts are disputed, decide what property you are claiming as exempt, and decide what you want to do about each of your secured debts. (Here's a list of the forms you'll need in Chapter 7, and where to find them.)

6. Take a credit counseling course.

Individuals who file for bankruptcy must complete a course before filing for bankruptcy, or, in some cases, shortly thereafter. (Find out more in The Pre-Bankruptcy Credit Counseling Requirement.)

7. File the forms.
Filing your petition (the main bankruptcy form) officially starts your case. Most people file all the forms at once, but if you're in an emergency, you can file just a two-page form, and then file the complete set of the forms within 14 days. (To learn more, see Filing for Bankruptcy.)

8. Go to a meeting.
In most cases, you'll need to go to court only once, for a short meeting with the trustee (and perhaps a creditor or two) to review your case and answer any questions about the information in your forms. (To learn more see, The Meeting of Creditors in Chapter 7 Bankruptcy.)

9. File objections or motions if needed.
If you dispute a creditor's claim against you or you want to eliminate certain liens, you'll need to address these matters before your bankruptcy case is closed.

10. Wind up your secured debts.
When you filed your bankruptcy forms, you completed a form in which you stated how you intended to handle your secured debts. Before your case is closed, you'll need to act on these matters. (For more information, see What Is a Secured Debt?)

11. Complete a debtor education course.

After you file your paperwork, you'll need to complete the second course, called a debtor education course, before you'll be entitled to receive your discharge (the order that wipes out your debt). (Learn more in What Is Credit and Debt Counseling in Bankruptcy?)

12. Get your discharge.
Congratulations! This is what it's all about. At the end of a successful bankruptcy, the court will issue an order saying that your qualifying debts are officially discharged. Once a debt is discharged, you no longer have a legal obligation to pay it and the creditor has no legal right to demand it.

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