Chapter 7 Bankruptcy

Written by True Tamplin, BSc, CEPF® | Reviewed by Editorial Team

Updated on December 15, 2022

What Is Chapter 7 Bankruptcy?

Chapter 7 bankruptcy is a bankruptcy protocol whereby a trustee is appointed to oversee the liquidation of a debtor's nonexempt assets.

The proceeds from the liquidation are used to pay back the creditors, and any remaining debt is discharged. Filing also triggers an automatic stay that prevents creditors from pursuing you.

How to File Bankruptcy Chapter 7?

To file chapter 7 bankruptcy, you will need to petition the bankruptcy court in the area in which you live.

The best first step is to contact an accredited bankruptcy lawyer to help sort out your case.

When to File Bankruptcy Chapter 7

It may be time to file chapter 7 bankruptcy if you are carrying more than $10,000 in debt and/or if your credit score is below 600. Both scenarios can be difficult to escape from unless you can get your debts expunged.

If this applies to you or if you feel that chapter 7 may still be the best path to debt relief, consult with a bankruptcy lawyer to help figure out your case.

Chapter 7 Bankruptcy FAQs

What does bankruptcy mean?

Bankruptcy is a legal proceeding in which a debtor declares their inability to pay back their creditors.

What are the different types of bankruptcy?

There are three common types of bankruptcy known as “chapters” in the U.S. bankruptcy code, Ch. 7, Ch. 11, and Ch. 13, each with varying criteria and consequences.

What is Chapter 7 bankruptcy?

Chapter 7 is known as a liquidation bankruptcy. Most of your property will be sold to pay off your debts, then whatever debt in excess of the value of your liquidated property will be cleared.

What is Chapter 13 bankruptcy?

Chapter 13 bankruptcy is a reorganization bankruptcy. With Chapter 13, you are able to keep your personal property and reorganize your debts to a payment schedule that enables you to pay back your creditors over time (often 3 to 5 years).

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.

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