Chapter 7 is often referred to as "straight bankruptcy" or liquidation. In a Chapter 7, the debtor gets to keep his or her exempt property; but if he or she has property that is not exempt, then the Trustee can take that nonexempt property and sell it for the benefit of the debtor's creditors.
The Chapter 7 process is relatively simple. After the case is filed, a Meeting of Creditors is scheduled about six weeks later. This is usually the only hearing or procedure a Chapter 7 Debtor has to participate in. If you are married, and you are both filing bankruptcy; both of you must attend the meeting of creditors. At the meeting, a Trustee, who was appointed by the Department of Justice U.S. Trustee's office, questions the debtors in a meeting room under oath, making sure that the debtors have been honest and forthright in their disclosures. The meeting usually doesn't take more than ten minutes.
Sixty to Seventy Days later, if the case is in order, and they are almost every time; the Debtor receives a discharge, and almost all of his or her unsecured debts go away as if they were flushed down a drain. Certain debts are not dischargeable including most taxes, cash advances taken just before filing bankruptcy, payments ordered in a divorce or other family law order, and debts incurred through DUI accidents, or fraud.
There are requirements that must be met to file a Chapter 7 and receive a discharge. Since October of 2005, people with incomes over the median are not allowed to file unless after subtracting normal living expenses, they have about $150 or less per month left over. This rule precludes almost all families with incomes of over $100,000 annually and almost all individuals with incomes in excess of $65,000 from filing Chapter 7 unless they have a lot of dependents. Each case is unique, and Miles W. Rich attempts to qualify the clients in his first phone conversation with them.
The usual stumbling blocks for clients in filing a Chapter 7 are either they are behind on their mortgage payments or their vehicle payments. Debtors who are current on their payments may successfully file a Chapter 7, provided they don't have too much equity in their homes. But if they are behind in their payments, and they desire to keep their homes, Chapter 7 will not work for them. Instead, they must file Chapter 13.