Chapter 7 is sometimes called 'straight bankruptcy'. The actual title in the Bankruptcy Code for Chapter 7 is 'Liquidation'.
This is the Chapter where you eliminate all of your debts, with some exceptions.
The common exceptions are income taxes, student loans and child support.
You can file individually or a joint case with your spouse. Other co-signers are not protected.
You keep all property which you are able to claim 'exempt' under a different list for each state.
Collateral loans like home mortgages and car loans can also be included but you have certain choices;
You can keep paying & keep the item (reaffirm), or you can give it back & not owe any balance (surrender), or buy the item at it's actual value & not owe any balance (redeem)
If your household income exceeds the average income for your state a formula is used (means test) to see if the case should be dismissed for 'abuse'. (since 10/05)
The court filing fee is $335 collected by the attorney and paid to the court clerk. Two credit counseling sessions are required which cost less than $50. These can be done on the phone or computer.
Attorney fees add another $650 to $1050 with most cases in the $650 to $750 range.
The lowest total fees and costs are around $1,000.00. Terms are usually two-thirds down, balance at the trustee meeting, a month or two later.
The case is open for about 4 months after which the court clerk mails out the 'discharge of debtor'
Filing either bankruptcy chapter stops creditors from all collection attempts (automatic stay)
This applies to all phone calls, letters, lawsuits, garnishments, repossessions and foreclosures.
Certain pre-bankruptcy conduct is scrutinized. Running up credit card balances in the prior 70 days, undervalued transfers of property in the past two years, large repayments on preferred debts in the past 90 days (1 year for relatives)
Chapter 7 stays on your credit report for 10 years. Credit is usually still available since you can't file another bankruptcy for 8 years. Usually two years for a conventional home mortgage and credit for other reasonable debts.
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