Chapter 7 bankruptcy is the most common type of bankruptcy. It is also the quickest and least expensive type of bankruptcy.

Chapter 7 is a powerful strategy. It allows filers to discharge unsecured debts like credit card debts, medical debts, personal loans and payday loans, debts left over from car repossessions, and even some tax debts. Chapter 7 bankruptcy can also stop many wage garnishments, bank levies, evictions, and repossessions.

Eligibility

The bankruptcy court requires you to provide some information to demonstrate that you are eligible to file Chapter 7. This information fits into four categories: your monthly income, monthly expenses, assets, and debts.

Assets and Exemptions

When you file Chapter 7 bankruptcy, you make a list of your assets. You also tell the bankruptcy court which assets you want to keep (or “exempt”) in your bankruptcy. The exemptions have limited dollar amounts. In California, these exemptions are very generous. Most people keep everything they own when they file Chapter 7 bankruptcy.

Monthly income and expenses

You also tell the court about your household’s monthly income and expenses. The court then considers whether you have money left over after paying your living expenses. Any leftover money is called your “disposable income.” If you have a certain amount of disposable income, you might be required to file bankruptcy under a different chapter.

Debts

There is no minimum or maximum amount of debt you can have when filing Chapter 7 bankruptcy. As a practical matter, you want to be sure you have enough debt to justify filing bankruptcy, and you want to be sure your types of debts can be dealt with successfully in Chapter 7 bankruptcy.

Advantages of Chapter 7 Bankruptcy

• Chapter 7 takes only 4-6 months from filing date to case closing date for a typical case.
• Chapter 7 completely wipes out most unsecured debts like credit cards, personal loans, judgments, medical debts, car repossessions, old utility bills, and other debts.
• Chapter 7 can stop debt lawsuits, collections, garnishments, evictions, and repossessions.
• Chapter 7 can often help you get back money that was garnished or levied within 90 days of your bankruptcy filing date.
• Chapter 7 can discharge some tax obligations.
• If you choose to do so, you can usually keep your house and vehicle when you file, assuming you can exempt any equity.
• Most people keep all their assets when they file Chapter 7 bankruptcy. California has very generous bankruptcy exemptions.

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