Chapter 7 Bankruptcy FAQ

Chapter 7 is the bankruptcy chapter that eliminates qualifying unsecured debt quickly, usually within three to four months from filing to discharge.

It’s often called liquidation bankruptcy, though that name misleads most people. A trustee reviews your assets, and any non-exempt assets could theoretically be sold to pay creditors. In practice, the overwhelming majority of consumer filers have no non-exempt assets, because bankruptcy exemptions protect most or all of what they own.

At the end of a successful case, the court enters a discharge order. That order permanently wipes out your qualifying debt. Creditors can never legally collect on it again.

Chapter 7 works well for people whose income qualifies under the means test and who don’t have significant non-exempt assets to protect.

Chapter 7 eliminates most unsecured debt: credit card balances, medical bills, personal loans, unpaid utility bills, old judgments from civil lawsuits, and many other obligations that aren’t backed by collateral.

It does not eliminate everything. Student loans, recent tax debt, child support, alimony, and debt from fraud generally survive a Chapter 7 case. I cover the full list on my general Bankruptcy FAQ page.

Secured debt, like a car loan or mortgage, gets handled differently. You can keep the collateral by continuing to pay, or surrender it and have the debt discharged. Chapter 7 discharges your personal liability either way, but a lien on the collateral itself generally survives unless you give it up.

If a meaningful share of your debt is unsecured and dischargeable, Chapter 7 can resolve most of your financial problem in under four months.

Eligibility for Chapter 7 depends primarily on your income, measured by a calculation called the means test.

The means test starts by comparing your average household income over the six months before filing to the median income for a household of your size in your state. If your income is at or below the median, you generally qualify for Chapter 7 without further analysis.

If your income is above the median, the test moves to a second step that looks at your actual disposable income after allowed expenses, using standardized deduction figures set by the IRS and the bankruptcy code. If that calculation shows you don’t have enough disposable income left to meaningfully repay creditors, you still qualify for Chapter 7.

Median income figures change periodically and vary by state and household size, so I run this calculation with your actual numbers during a consultation rather than relying on rules of thumb.

If your income disqualifies you from Chapter 7, Chapter 13 is almost always available instead, and in some cases it’s actually the better fit anyway.

Most Chapter 7 cases run from filing to discharge in about three to four months.

After I file your case, the court schedules a meeting of creditors, called the 341 meeting, usually 20 to 40 days after filing. I prepare you for it and attend with you. Most meetings last only a few minutes.

Creditors then have 60 days from the 341 meeting to object to your discharge or challenge the dischargeability of a specific debt. Objections are rare in straightforward consumer cases.

Assuming no objections, the court enters your discharge shortly after that 60-day window closes. Your case is complete, and your qualifying debts are gone.

More complex cases, ones involving business assets, real estate, or disputes with the trustee, can take longer. I’ll give you a realistic timeline based on your specific facts.

In most cases, no. Bankruptcy exemptions are designed to let you keep essential property, and most of my Chapter 7 clients keep everything they own.

For your home, Washington DC offers an unlimited homestead exemption in many circumstances, among the most generous in the country. Maryland and Virginia offer their own homestead exemptions with set dollar amounts. If your equity falls within your jurisdiction’s exemption, your home is protected.

For your car, most jurisdictions provide a vehicle exemption covering a set amount of equity. Many vehicles with loans against them have little or no equity, which makes them simple to keep. If your equity exceeds the exemption, the trustee could theoretically sell the vehicle, but trustees generally only do this when there’s real value to recover after costs.

Choosing the right exemption scheme, and in some cases choosing between federal and state exemptions where that option exists, is one of the most important strategic decisions in your case. I walk through this in detail during your consultation.

Your tax refund is an asset, and whether you keep it depends on timing, the amount, and the exemptions available to you.

If you file before receiving a refund for a tax year that’s already ended, the portion of that refund attributable to income earned before your filing date becomes part of your bankruptcy estate, even if you haven’t received the money yet.

Whether the trustee can actually take it depends on your available exemptions. DC, Maryland, and Virginia each have exemption schemes that may protect some or all of a refund, particularly smaller refunds or refunds tied to certain tax credits.

Timing your filing around when you expect a refund, and around when you’ve already spent one, is a strategic decision I help clients make before filing rather than after. If you’re expecting a significant refund, mention it before I file your case, not after.

Yes, in nearly every case. 401(k) plans, 403(b) plans, and most other ERISA-qualified retirement accounts are excluded from your bankruptcy estate entirely. They’re not even part of the exemption analysis.

IRAs and Roth IRAs are protected by a specific federal exemption, currently just over $1.7 million per person. That covers the full balance for nearly every individual filer.

Don’t withdraw from your retirement accounts to pay creditors before talking to me. That money is almost always already protected, and spending it down can hurt you rather than help.

Chapter 7 has two costs: the federal court filing fee, currently $338, which is the same no matter which attorney you use, and my attorney fee.

My fee depends on the complexity of your case, your jurisdiction, and the specific issues involved. I’ll give you a clear, specific quote before you commit to anything.

If you can’t afford the filing fee, you may qualify for a fee waiver if your income falls below 150 percent of the federal poverty guideline, or you can request to pay it in up to four installments over 120 days.

I also work out payment arrangements with many clients on attorney fees. Don’t let cost stop you from calling. Call (202) 448-5136 and let’s figure out what’s possible.

Yes. The moment you file, the automatic stay takes effect and stops nearly all collection activity, including pending lawsuits and active wage garnishment.

If you’re being sued, the lawsuit halts immediately. If a judgment has already been entered and your wages are being garnished, your employer must stop the garnishment, and wages withheld after your filing date come back to you.

The stay lasts through your entire Chapter 7 case, typically three to four months. Once your debt is discharged, the underlying obligation no longer exists, so the garnishment or lawsuit can’t resume.

Domestic support obligations, like child support and alimony, aren’t covered by the automatic stay. For nearly everything else, filing stops the bleeding immediately.

A Chapter 7 stays on your credit report for ten years from your filing date. That’s a real mark, but it’s only part of the picture.

If you’re considering Chapter 7, your credit is very likely already damaged from missed payments, collections, and charge-offs. That damage compounds every month the debt stays unresolved. Filing stops new derogatory marks from piling up, and the discharge eliminates the debts that were dragging your score down.

Many of my clients qualify for a secured credit card within months of discharge and see meaningful score improvements within one to two years. Mortgage eligibility after Chapter 7 ranges from two to four years depending on the loan type, often shorter than people expect.

If your credit is already struggling, Chapter 7 is often the fastest path to a credit score that’s actually improving instead of continuing to fall.

Yes, but you have to wait eight years from the date of your prior Chapter 7 filing before you’re eligible for another Chapter 7 discharge.

If your prior case was a Chapter 13 that resulted in discharge, the wait for a Chapter 7 discharge is six years, with an exception if that Chapter 13 plan paid unsecured creditors in full, or paid at least 70 percent of unsecured claims.

If a prior case was dismissed, rather than discharged, within the year before your new filing, the automatic stay in your new case may be limited to 30 days unless the court extends it, or may not apply at all if you had two or more cases dismissed in the prior year.

These timing rules are technical. If you’ve filed before, bring the details of that case to your consultation so I can tell you exactly where you stand.

If you personally file Chapter 7 and you own a small business, what happens to the business depends on how it’s structured and whether it has value beyond your labor.

If your business is a sole proprietorship, its assets and debts are legally yours, and they become part of your personal bankruptcy estate. Business equipment, inventory, and accounts receivable get evaluated the same way any other asset would, against the exemptions available to you.

If your business is a corporation or LLC, the business itself is a separate legal entity that generally isn’t pulled into your personal Chapter 7 case, but your ownership interest in it is an asset that has to be disclosed and valued. For most small, struggling businesses with little resale value, this often doesn’t create a problem.

If you personally guaranteed business debt, like an SBA loan or a business credit line, that guarantee is a personal debt that can usually be addressed in your Chapter 7 case, even if the business itself doesn’t file.

Business situations are fact-specific. If you’re a business owner considering Chapter 7, bring your business financials to the consultation so I can map out what happens to the business and to you personally.

No, in nearly every case. You’re required to list all of your creditors in your bankruptcy, including credit card companies, regardless of whether you intend to keep paying them. Once an account is listed, the issuer almost always closes it, even with a zero balance and perfect payment history.

This isn’t something you can work around. It’s simply how credit card companies respond to a bankruptcy filing.

The good news is that getting new credit afterward is often easier than people expect. Secured credit cards, which require a cash deposit as your credit limit, are typically available shortly after discharge and are the fastest way to start rebuilding.

Chapter 7 fits if your income qualifies under the means test, you don’t have significant non-exempt assets, and your goal is the fastest possible discharge of unsecured debt.

Chapter 13 fits better if you want to catch up on mortgage arrears and keep your home, if your income disqualifies you from Chapter 7, if you have assets that exceed your available exemptions, or if you have non-dischargeable priority debt, like recent taxes, that needs to be paid through a structured plan.

I cover Chapter 13 in detail on its own page. The right answer for you depends on your income, your assets, and your goals, which is exactly what I work through with you in a free consultation.

No. You can file Chapter 7 by yourself even if you’re married.

Filing alone makes sense when most of the debt is in your name. Your discharge wipes out your liability, while your spouse’s separate debts and separate credit stay untouched.

On joint debts, your discharge protects you but not your spouse, so the creditor can still come after them for the balance. That’s the main thing to weigh.

DC, Maryland, and Virginia aren’t community property states, which simplifies this. I’ll look at whose name is on what and tell you whether filing alone or together protects you better.

Sooner than most people think. A Chapter 7 on your record doesn’t lock you out of a mortgage.

For an FHA loan, the typical wait is two years from your discharge date. For a conventional loan backed by Fannie Mae or Freddie Mac, it’s usually four years, shorter with documented extenuating circumstances. VA loans often follow a two-year guideline.

Those clocks start at discharge, not when you filed, which is one more reason not to delay a filing you already need. Lenders still look at your credit score, income, and down payment, so rebuilding credit after discharge matters.

Many of my clients are mortgage-ready within two to four years of filing. Start rebuilding the day your case closes.

The wildcard exemption is a flexible exemption you can apply to almost any property you choose, including assets that don’t fit a specific category, like cash, money in the bank, a tax refund, or stock.

Most exemptions are tied to a particular type of property: a set amount for your home, a set amount for your car. The wildcard is different. You point it at whatever you most need to protect.

How much wildcard you get, and whether it’s available at all, depends on your jurisdiction and which exemption scheme you use, and DC, Maryland, and Virginia each handle this differently. Choosing the scheme that maximizes your wildcard is one of the most important strategic calls in a Chapter 7 case.

If you’re worried about protecting savings, a refund, or an unusual asset, don’t assume it’s lost. Bring a list of what you own to your consultation and I’ll show you how the exemptions, including the wildcard, apply to you.

Often, yes, but a pending claim is an asset, and it must be handled carefully.

If you have a lawsuit or a personal injury claim pending when you file Chapter 7, the right to that money becomes part of your bankruptcy estate, even though the case hasn’t paid out yet. You must disclose it.

Whether you keep it comes down to exemptions. Many jurisdictions specifically protect personal injury recoveries up to a limit, and your wildcard exemption can sometimes cover the rest. DC, Maryland, and Virginia each treat this differently.

Failing to list a pending claim is one of the costliest mistakes a filer can make, and it can cost you the claim entirely. If you have any lawsuit or injury claim in progress, tell me before I file. I’ll make sure it’s disclosed and protected as fully as the law allows.