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A Chapter 7 is commonly referred to as a "straight" or "total" bankruptcy. It is designed for individuals or corporations who cannot pay their debts. It cancels or discharges most of your debts. The most common debts discharged in a Chapter 7 are credit card bills, finance company loans, medical/hospital bills, automobile repossession debts, foreclosure debts, and judgments from lawsuits. There are some debts that cannot be discharged in Chapter 7 cases, such as child/spousal support obligations, student loans, most taxes, court fines and restitution orders, debts for damages caused while driving under the influences of alcohol or drugs, and fraudulent debts. Certain taxes and some student loans can be discharged in bankruptcy; however, the standards for discharge are quite complex and require a review by one of our attorneys.
Immediately upon the filing of a bankruptcy petition (either Chapter 7 or Chapter 13) the Court issues a restraining order called an "Automatic Stay," which prohibits all creditors from contacting you or proceeding with any collection action against you, including foreclosures, levies, and wage garnishments. Any such actions that may have already begun prior to the filing of your case are immediately halted.
The Chapter 7 process takes about 4 months. There is usually only one required hearing about a month after your case is filed (called the First Meeting of Creditors). This hearing is very quick and informal-- usually less than 5 minutes. It is not held in a courtroom, but rather in the office of the U.S. Trustee. Everything else is handled by our office. Approximately four months after the filing of your Bankruptcy Petition, the Court will mail the Discharge directly to you. This signifies the end of your case and is a permanent order prohibiting creditors from taking any collection actions against you.
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What is a Chapter 7?