Chapter 7 Bankruptcy

A bankruptcy process that liquidates non-exempt assets to discharge most unsecured debt, typically completed in a few months.

Chapter 7 is what most people picture when they hear “bankruptcy” — it wipes out most unsecured debt (credit cards, medical bills, personal loans) and usually wraps up in 3 to 6 months. A trustee is technically allowed to sell off any assets you own that aren’t protected, but in practice, most people who file Chapter 7 don’t lose anything — state and federal exemption rules shield most household belongings, a chunk of home equity, and a vehicle up to a certain value, so most cases are what’s called “no-asset” cases.

Whether you qualify comes down to the means test: if your household income is at or below your state’s median for a household your size, you’re automatically eligible. Above that, there’s a more detailed look at your actual expenses that might still qualify you — or might steer you toward Chapter 13 instead.

The moment you file, an automatic stay kicks in and stops most collection activity in its tracks — lawsuits, garnishments, the calls, all of it, at least while the case is open. Not everything gets wiped out, though: most federal student loans, recent tax debt, child support, and debt tied to fraud generally survive a Chapter 7 filing.