№ PADUKY
Marcus Herbert
BankruptcyReal Estate
- City
- Paducah
Bankruptcy · Sub-Practice
Chapter 7 Bankruptcy
Chapter 7 eliminates most unsecured debt in 3–6 months. For many people, it is the fastest path to a financial fresh start.
§ Overview
What your case actually involves.
Chapter 7 is the most common form of personal bankruptcy in the United States. It discharges most unsecured debts — credit cards, medical bills, personal loans — in a matter of months, without requiring a repayment plan.
In Chapter 7, a bankruptcy trustee is appointed to review the debtor's assets and, if there are non-exempt assets, liquidate them to pay creditors. In practice, the vast majority of Chapter 7 cases are "no-asset" cases — meaning all assets are protected by exemptions and creditors receive nothing. The case typically concludes in 3–6 months with a discharge order that legally eliminates most qualifying debts. Not all debts are dischargeable: student loans, most taxes, child support, alimony, criminal fines, and debts from fraud are typically non-dischargeable. Chapter 7 requires passing the means test — a calculation comparing your income to your state's median income. If your income is too high, you may need to file Chapter 13 instead.
§ Protections and benefits
- ▸Automatic stay — the moment you file, all collection calls, lawsuits, and wage garnishments stop
- ▸Discharge of credit card debt, medical bills, and personal loans
- ▸Protection of exempt assets — home equity, vehicle, retirement accounts, household goods
- ▸No repayment plan — debt eliminated without monthly payments to creditors
- ▸Fresh start — discharge order issues in 3–6 months from filing
- ▸Protection of exempt retirement accounts — 401(k) and IRA funds are typically fully protected
§ The process, step by step
- ›Credit counseling — required course completed within 180 days before filing
- ›Means test — income comparison to state median; determines eligibility for Chapter 7
- ›Filing the petition — schedules of assets, liabilities, income, and expenses filed with the court
- ›Automatic stay — immediate upon filing; stops all collection activity
- ›341 meeting of creditors — brief meeting with trustee typically 30–45 days after filing
- ›Discharge — order eliminating qualifying debts issued 60 days after the creditor meeting
“The most important thing to understand about Chapter 7 is what happens before you file, not during. Strategic asset positioning — making sure your home equity is within exemption limits, ensuring retirement funds are protected, not paying relatives back right before filing — dramatically affects outcomes. An attorney who counsels you months before filing produces better results than one who simply prepares the forms. The 90-day look-back for preferences and the 1-year look-back for insider transactions are the two dates that govern what you should and shouldn't do before filing.”
§ What to look for in an attorney
- 01Comprehensive exemption planning — maximizing what you keep requires pre-filing strategy
- 02Means test expertise — the income calculation has significant nuance
- 03Experience identifying non-dischargeable debts — know what survives before you file
- 04Transparent flat-fee structure — bankruptcy attorneys typically charge fixed fees
- 05Experience with your state's specific exemptions — they vary dramatically
- 06Post-discharge credit rebuilding guidance — the bankruptcy is the beginning, not the end
⚖️
§ Ask these at your consultation
6 questions that matter
- ❓Do I pass the means test — am I eligible for Chapter 7 or do I need Chapter 13?
- 💰Which of my assets are protected by exemptions, and are any at risk?
- 🔍Which of my debts are dischargeable, and which will survive bankruptcy?
- 📋How will Chapter 7 affect my credit, and for how long?
- 💬Are there any alternatives to bankruptcy I should consider first?
- 💡What is your fee, and what does it include?
§ Frequently asked questions
Common questions about chapter 7 bankruptcy.
Q 01
Will I lose my house if I file Chapter 7?
Not automatically. Chapter 7 protects equity in your home up to your state's homestead exemption — which ranges from a few thousand dollars to unlimited (Florida, Texas). If your equity is within the exemption, your home is protected and you can continue making mortgage payments and keep it. If you have significant non-exempt equity, the trustee could sell the home. Pre-filing equity planning with an attorney is essential if your home equity is near or above your state's exemption limit.
Q 02
Can Chapter 7 eliminate my student loans?
Only in limited circumstances. Student loans are presumed non-dischargeable in bankruptcy. To discharge them, you must demonstrate "undue hardship" under the Brunner test in most circuits — proving that you cannot maintain a minimal standard of living if forced to repay, that your situation is likely to persist, and that you've made good-faith efforts to repay. Courts have historically applied this standard very strictly, though some circuits are becoming more flexible. An attorney can assess whether your specific situation might qualify.
Q 03
How does the means test work?
The means test compares your average monthly income over the past 6 months to your state's median income for a household of your size. If your income is at or below the median, you automatically qualify for Chapter 7. If you're above the median, a second part of the test calculates your disposable income after allowed expenses. If your disposable income is below a threshold, you still qualify. The means test has significant nuance — certain income types are excluded, and allowed expenses include both actual expenses and IRS standards. An attorney's analysis often reveals qualifications that a self-filer misses.
Q 04
How long does Chapter 7 stay on my credit report?
A Chapter 7 bankruptcy remains on your credit report for 10 years from the filing date. However, many people find their credit improves significantly within 1–2 years of discharge, because the discharged debts no longer appear as delinquent accounts and their debt-to-income ratio improves dramatically. Secured credit cards, becoming an authorized user on another account, and consistent on-time payments after discharge accelerate recovery. Many bankruptcy filers qualify for auto loans and even mortgages within 2–4 years.
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