Chapter 7 Bankruptcy

In Chapter 7 bankruptcy, the court-appointed bankruptcy trustee cancels many (or all) of your debts. At the same time, the trustee might also sell (liquidate) some of your property to repay your creditors. Chapter 7 bankruptcy is also called "straight" or "liquidation" bankruptcy because the law is contained in Chapter 7 of the federal Bankruptcy Code.

The entire Chapter 7 bankruptcy process takes about four to six months, and usually requires only one trip to the courthouse. Filers must also complete credit counseling with an agency approved by the United States Trustee. In order to qualify for a Chapter 7, you must first pass the means test, which compares your income to the median income of a family of the same size in your state. If your income is too high, you aren’t eligible for a Chapter 7, although you still have the option of filing a Chapter 13.