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What is Chapter 7 Bankruptcy?

Chapter 7 bankruptcy, often called “liquidation bankruptcy,” is a legal process that can help those in debt eliminate certain types of debt and get a fresh financial start. Here’s what you need to know about Chapter 7:


To qualify for Chapter 7 bankruptcy, you must pass a means test, which compares your income to the median income in your state.

    • If your income is below the median, you typically qualify for Chapter 7.
    • If your income is above the median, you may still qualify based on your expenses and ability to repay debts.

Protection of Assets:

  • Chapter 7 bankruptcy can eliminate unsecured debts such as credit card balances, medical bills, personal loans, and utility bills.
  • These debts are discharged, meaning you are no longer legally obligated to repay them.

Types of Debts that Can Be Discharged:

  • Chapter 13 bankruptcy can help with a wide range of debts, including mortgage arrears, car loans, tax debts, past-due child support or alimony payments, and some debts included in a divorce.
  • You’ll make regular payments to a bankruptcy trustee, who will distribute the funds to your creditors according to the terms of your repayment plan.

Types of Debts that Cannot Be Discharged:

  • Some debts are not typically discharged in Chapter 7 bankruptcy, including child support, alimony, certain tax debts, student loans (in most cases), and debts incurred through fraud or malicious intent.
  • It’s important to consult with a bankruptcy attorney to understand which debts may not be dischargeable in your specific situation.

Your choices are clear...

Chapter 7 bankruptcy can provide much-needed relief for individuals drowning in debt, offering a path towards financial freedom and a fresh start. If you’re considering filing for bankruptcy, contact New Tomorrow Law, APC® to let us help you navigate the process effectively and understand how it may impact your financial future.

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