Chapter 7 bankruptcy can wipe out your unsecured debts, such as credit card bills and medical expenses. It doesn't relieve secured debts, which are backed by collateral such as a home or car. Only low-income individuals with little wealth qualify for Chapter 7, in which a federal district court appoints a trustee to oversee the bankruptcy. The trustee's job is to sell your nonexempt property and use the money to repay your creditors. Exempt property, such as your car, home, clothing, pensions and public benefits, is protected from confiscation under Chapter 7. However, your bank can foreclose on your home if you missed mortgage payments, and your vehicle can be repossessed if you fall behind on loan payments.
Do It Yourself Bankruptcy
You can file for bankruptcy without a lawyer, a procedure called pro se. However, the rules are somewhat complex and require some research if you choose to represent yourself in a Chapter 7 bankruptcy. A pro se filing might be appropriate if you have a relatively simple case, without complicating factors such as court-ordered child support or allegations of fraud. Married couples can apply for a joint Chapter 7 bankruptcy.
Steps for Self-Filing
Chapter 7 is not a trivial procedure. If you want to go forward without a lawyer, bankruptcy preparation services are available to help you complete all of the mandatory forms.
Pass a Means Test
The bankruptcy laws set income and wealth limits on those seeking Chapter 7. You have to disclose information about of your income, property and debts to the court before it decides whether it will allow you to proceed with Chapter 7.
Receive Credit Counseling
Another pre-filing requirement is to receive credit counseling from an authorized source. You must attend a financial management course to become educated about the use of credit. You then file documents with the court confirming that you've received the mandatory counseling.
Complete the Official Bankruptcy Forms
The principal form is the Voluntary Petition. If you have scant financial resources, you can complete a Chapter 7 Fee Waiver Application, which can reduce filing fees by hundreds of dollars. Other forms include:
- List of unsecured creditors
- Schedules of your personal and real property, creditors holding unsecured and secured debt, current income and expenditures, leases, contracts, tuition/education accounts and more.
- Statement of Intention
- Statement of Financial Affairs, a multi-part questionnaire
- List of Case Commencement Notes advising creditors of your plan to file for Chapter 7
- A copy of any negotiated debt repayment plans
File the Packet
After completing and assembling your information, file your request and filing fees with the court clerk, who will schedule your case. Filing a Chapter 7 petition automatically prevents creditors from taking further action until the case is resolved.
Attend the Creditor Meeting
The trustee will set up a meeting within 40 days of the date you filed the bankruptcy petition. At the meeting, you'll face questions under oath. The trustee might try to work out an arrangement between you and your creditors to avoid further proceedings.