Chapter 7 Bankruptcy
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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, BNPL balances) and usually wraps up in 3 to 6 months, faster than any other formal debt-relief process available. 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.
Do I qualify?
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 for Chapter 7. Above that, there’s a more detailed look at your actual expenses — mortgage or rent, required debt payments, certain living costs — that might still qualify you, or might steer you toward Chapter 13 instead. The means test entry covers the calculation itself, and the site’s Chapter 7 means-test estimator gives you a real number against the current federal income thresholds rather than a guess.
What actually happens once you file?
The moment you file, an automatic stay kicks in and stops most collection activity in its tracks — lawsuits, wage garnishment, repossession of an auto loan, the calls, all of it, at least while the case is open. You’ll attend a short 341 meeting of creditors, a trustee reviews your filing for any non-exempt assets, and — assuming it’s a typical no-asset case — you receive a discharge a few months later. There’s no repayment plan involved, which is the core difference from Chapter 13.
What debt actually gets wiped out?
Most unsecured consumer debt is dischargeable: credit cards, medical bills, personal loans, most BNPL debt, and — despite persistent conventional wisdom to the contrary — even private student loans and federal student loans, though those require proving “undue hardship” in a separate legal process rather than discharging automatically.
Not everything goes away, though. These generally survive a Chapter 7 filing regardless of the discharge:
- Most recent federal, state, and some other tax debt (older tax debt can sometimes qualify — this is genuinely complex and worth professional advice)
- Child support and alimony obligations
- Debts from fraud, embezzlement, or certain court judgments involving willful injury
- Most student loans, unless undue hardship is separately proven
- Secured debt if you want to keep the collateral (you keep paying the car loan or mortgage, or the lender can eventually repossess/foreclose)
Chapter 7 vs. Chapter 13 — which one am I actually looking at?
Chapter 7 liquidates (sells off non-exempt assets, if any) and discharges debt in a few months with no repayment plan. Chapter 13 reorganizes debt into a 3-5 year repayment plan instead, and is generally the path for people who earn too much to pass the means test, or who specifically want to catch up on a mortgage or car loan while keeping the property. If you qualify for Chapter 7 on the means test, it’s almost always faster and simpler — Chapter 13 exists mainly for the cases Chapter 7 doesn’t fit.
Frequently asked
Will I lose my house or car if I file Chapter 7?
Not automatically. State and federal exemption rules protect a certain amount of home equity and a vehicle up to a set value, and most Chapter 7 cases are "no-asset" cases where nothing gets sold. You can also generally keep secured property like a car or house by staying current on the loan payments, since the loan itself isn't discharged away from the collateral.
— US Debt Compass Editorial Team
How much does it cost to file Chapter 7?
The federal court filing fee is a few hundred dollars (currently $338, though fees can change — check the current fee on uscourts.gov), plus attorney fees if you use one, which typically run well beyond the filing fee itself. Fee waivers and installment payment of the court fee are available for those who qualify based on income.
— US Debt Compass Editorial Team
Can I file Chapter 7 more than once?
Yes, but not right away. You generally have to wait 8 years from your last Chapter 7 discharge to receive another Chapter 7 discharge, though you may be able to file a Chapter 13 sooner in some circumstances.
— US Debt Compass Editorial Team
Does Chapter 7 stop a wage garnishment or lawsuit immediately?
Yes — the automatic stay takes effect the moment you file, before the case is even reviewed, and it halts most active garnishments, lawsuits, and collection calls right away. See the automatic stay entry for what it does and doesn't cover.
— US Debt Compass Editorial Team
Sources
- U.S. Courts — Chapter 7 Bankruptcy Basics— uscourts.gov
- U.S. Courts — Bankruptcy Filing Fees— uscourts.gov
- 11 U.S.C. § 707(b) — Means test— law.cornell.edu