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Chapter 7

Chapter 7

Chapter 7 is what most people think of when they think of bankruptcy. One of the main purposes of Chapter 7 is to discharge debts to give you a "fresh start." You have no liability for discharged debts. In a Chapter 7 case, only individuals are eligible for a discharge; partnerships, corporations and LLCs can’t get one. Although an individual Chapter 7 case usually results in a discharge of debts, the right to a discharge is not absolute, and some types of debts are not discharged (domestic support obligations, recent taxes, and student loans are the major ones.)

To be eligible for Chapter 7 relief, you must first complete a process known as “means testing.” You also have to take a credit counseling course from an approved credit counselor. (This can be done over the internet, rather than in person.) If you decide to file for Chapter 7, we can discuss these requirements before we move ahead with your case.

A Chapter 7 starts when your petition is filed with the U.S. Bankruptcy Court. Documents relating to income and expenses, debts, property (real property as well as personal property—your “stuff”), and other financial disclosures must be prepared and filed.

Bankruptcy, particularly under the new law, is not for even the casual attorney. It needs someone who regularly appears before the Bankruptcy Court, is familiar with both the written law and the unwritten law and local practice.

Filing a Chapter 7 case stops most collection actions, but not everything (such as some child support actions). In addition, under some circumstances the Automatic Stay may exist for only a short period of time.

About six weeks after the petition is filed, the case trustee will hold a meeting of creditors. You will need to attend that meeting, but don’t worry—I will be there with you, and you will be completely prepared to avoid any surprises. It isn’t a test, and only rarely do creditors show up. Most of the time, the meeting of creditors lasts less than five minutes, and we even send you a list of the common questions that are asked beforehand!

Your discharge, which will typically be handed down about four months after the case is filed, will release you from personal liability for most debts and prevent the creditors owed those debts from taking any collection actions against you. But the discharge is filled with exceptions, so it’s important for us to talk so I can help you learn what will, and what will not, be covered by your Chapter 7 discharge.

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