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Chapter 7 Bankruptcy

Chapter 7 is known as the “liquidation bankruptcy’’ because it discharges most of your unsecured debt. That includes credit card debt, medical bills, and personal loans.

Debts That Can and Can’t Be Discharged in Chapter 7 Bankruptcy


Chapter 7 should discharge most of the debts you owe, but there are some hard-and-fast debts that can’t be discharged in Chapter 7.


Some debts that CANNOT be discharged in a Chapter 7:


  • Alimony

  • Tax liens

  • Court fees and penalties

  • Personal injury debts owed due to an accident while you were intoxicated


Debts that CAN discharged in a Chapter 7 bankruptcy include:


  • Credit card debt

  • Medical bills

  • Personal loans

  • Mortgage or automobile loans that you can no longer pay, but you will lose possession of the home or automobile

  • Income tax debt – under some circumstances

  • Student loans — must prove undue hardship

  • HOA fees — if you surrender your home or condo

  • Any other form of unsecured debt.

A Chapter 7 bankruptcy is the quickest, simplest, and most common type of bankruptcy. According to the American Bankruptcy Institute (ABI), 94.3% of Chapter 7 filings had their debts discharged, meaning forgiven.  You must pass a “means test’’ to qualify for Chapter 7 filing. The bankruptcy means test examines financial records, including income, expenses, secured and unsecured debt to determine if your disposable income is below the median income (50% lower, 50% higher) for your state. The means test income level varies from state to state.


Once your case is filed, you are entitled to the protection of the “Automatic Stay”. This protection means creditors are not permitted to collect pre-filing debts from you by calling you or communicating with you. Additionally, any garnishment of your paycheck stops, any freezes on your bank account are lifted, and lawsuits come to a halt. Creditors may petition the court to continue certain lawsuits, such as foreclosure actions, however, they must first obtain permission to lift the Automatic Stay.

Your Path to Financial Freedom Begins Here

Too deep in debt to see a way out? Contact us at (914) 600-7161 for a free consultation. We can help you determine whether bankruptcy is right for you.

In New York State, a chapter 7 debtor can choose the exemptions that wish to apply to protect their assets. In many cases, an individual filing for Chapter 7 bankruptcy can keep the property that is important to them.  Most chapter 7 cases are “no asset” cases, meaning that there is not enough equity or value in the property (the estate/debtors’) for a trustee to sell it and pay off creditors. Generally, the Chapter 7 process can be completed in four to six months.

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