LawyerLandLegal Glossary

Chapter 7 Bankruptcy

A liquidation bankruptcy: non-exempt property may be sold to pay creditors, and qualifying debts are discharged.

Informational only - this is not legal advice. These definitions explain general legal vocabulary in plain English. They are not advice about your situation, reading them creates no attorney-client relationship, and the law differs from state to state and changes over time. For advice you can rely on, speak to a lawyer licensed in your state.

What it means

Chapter 7 is the form of bankruptcy most people mean by the word. A trustee is appointed, property that is not protected by an exemption may be sold to pay creditors, and qualifying remaining debts are discharged - legally extinguished, so they can no longer be collected.

In practice many individual Chapter 7 cases are "no asset" cases in which nothing is sold, because exemptions cover what the debtor owns. Exemptions are the heart of the analysis and vary considerably: some states require use of a state list, others allow a choice between state and federal lists, and the difference determines what is actually at risk.

Not every debt is dischargeable. Most student loans, recent tax debts, child support and alimony, and debts arising from fraud generally survive. A secured debt is also different from the collateral behind it: discharging personal liability on a car loan does not by itself keep the car.

Where this comes from

11 U.S.C. §§ 701-784 governs Chapter 7; § 727 governs the discharge and § 523 lists debts excepted from it. Eligibility is affected by the means test in § 707(b). Exemptions turn on state law under § 522.

When people hire a lawyer for this

The questions worth professional analysis before filing are whether the means test is met, which exemption set applies, and whether the debts causing the problem are actually dischargeable. Filing a Chapter 7 that discharges nothing that mattered is a real and avoidable outcome.

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Part of the LawyerLand plain-English legal glossary. Definitions are written from primary sources - statutes and court rules - and each entry states the authority it rests on, or says plainly when the doctrine is state law with no national rule.