Chapter 7 Bankruptcy

While the idea of bankruptcy often carries a negative connotation, bankruptcy laws were designed to give people in dire financial situations a chance to start over.

Bankruptcy can help you resolve your debt and get back on the stable financial ground, but because of the long-term negative impact on your creditworthiness, it’s important to understand the implications before you begin. This guide will explain what Chapter 7 bankruptcy entails, who is eligible to file and how bankruptcy will affect you now and in the future.

Chapter 7 bankruptcy, named for Chapter 7 of the Bankruptcy Code, is sometimes called liquidation bankruptcy because debtors may have to sell some of their assets to repay their debts. When the process is complete, the vast majority of debts are discharged and the consumer’s slate is wiped clean. Some debts, like tax liens or child support, will not be forgiven.

In 2021, there were 399,269 non-business bankruptcies, according to the Administrative Office of the U.S. Courts. Of those, Chapter 7 is by far the most common, making up 70% of all non-business bankruptcy filings that year.

There are two types of Chapter 7 bankruptcies:

• Asset case: Where the debtor owns assets that can be sold and the proceeds distributed to creditors
• No-asset case: Where the debtor doesn’t own any nonexempt property, cash or valuables

Other forms of bankruptcy, such as Chapter 13, typically allow the debtor to keep their property and work out a plan to repay creditors.

Contact Kurt O'Keefe at 313-962-4630 so you can get your questions answered and get your life moving back in the right direction.