In a Chapter 7 bankruptcy, the bankruptcy trustee gathers and sells your non-exempt assets and uses the proceeds to pay creditors. The Bankruptcy Code lets you keep certain “exempt” property. These exemptions may apply to assets such as your home, vehicle, household goods and furnishings and retirement accounts.
Eligibility. One of the primary purposes of bankruptcy is to discharge certain debts to give an individual debtor a “fresh start”; when your bankruptcy is finalized, you are no longer responsible for discharged debts.
In a Chapter 7 case, a discharge is available only to individual debtors. A partnership or corporation that files for Chapter 7 bankruptcy is dissolved.
Protection. Filing a petition under Chapter 7 stops most collection actions against you and your property through the “automatic stay.” As long as the automatic stay is in effect, creditors generally may not initiate or continue lawsuits, wage garnishments, or even telephone calls demanding payments. The bankruptcy clerk gives notice of your bankruptcy case to all creditors whose names and addresses you provide.
Between 20 and 40 days after the petition is filed, the case trustee will hold a meeting of creditors. You must attend the meeting and answer questions regarding your financial affairs and property.
After a Chapter 7 bankruptcy is final, it stays on your credit report for seven to 10 years from the date of filing the petition. The existence of the bankruptcy on your credit record may make credit less available and/or terms less favorable (although unpaid debt can have the same effect).