1. What is a chapter 7 bankruptcy case and how does it work?
A chapter 7 bankruptcy case is a proceeding under federal law in which the debtor seeks relief under chapter 7 of the Bankruptcy Code. Chapter 7 is that part (or chapter) of the Bankruptcy Code that deals with liquidation. The Bankruptcy Code is a federal law that deals with bankruptcy. A person who files a chapter 7 case is called a debtor. In a chapter 7 case, the debtor must turn his or her nonexempt property, if any exists, over to a trustee, who then converts the property to cash and pays the debtor's creditors. In return, the debtor receives a chapter 7 discharge, if he or she pays the filing fee, is eligible for the discharge, and obeys the orders and rules of the bankruptcy court.

2. What is a chapter 7 discharge?
It is a court order releasing a debtor from all of his or her dischargeable debts and ordering the creditors not to attempt to collect them from the debtor. A debt that is discharged is a debt that the debtor is released from and does not have to pay.

3. How does a person obtain a chapter 7 discharge?
A chapter 7 discharge is obtained by filing and maintaining a chapter 7 bankruptcy case and being eligible for a chapter 7 discharge. However, not all debts are discharged by a chapter 7 discharge. Certain types of debts are by law not dischargeable under chapter 7 and debts of this type will not be discharged even if the debtor receives a chapter 7 discharge.

4. Who is permitted to file and maintain a chapter 7 case? 
Any person who resides in, does business in, or has property in the United States is permitted to file a chapter 7 bankruptcy case except a person who has intentionally dismissed a prior bankruptcy case within the last 180 days. To be permitted to maintain a chapter 7 bankruptcy case, a person must qualify for chapter 7 relief under a process called "means testing".

5. How much is the filing fee in a chapter 7 case and when must it be paid?
The filing fee is $299.00 for either a single or a joint case. The filing fee is payable in installments in most states. A deposit is due when the case is filed.

6. How does the filing of a chapter 7 case by a person affect collection and other legal proceedings that have been filed against that person in other courts? 
The filing of a chapter 7 case by a person automatically suspends virtually all collection and other legal proceedings pending against that person. A few days after a chapter 7 case is filed, the court will mail a notice to all creditors ordering them to refrain from any further action against the person. This court-ordered suspension of creditor activity against the person filing is called the automatic stay. If necessary, notice of the automatic stay may be served on a creditor earlier by the person or the person's attorney. Any creditor who intentionally violates the automatic stay may be held in contempt of court and may be liable in damages to the person filing. Criminal proceedings and actions to collect domestic support obligations from exempt property or property acquired by the person after the chapter 7 case was filed are not affected by the automatic stay. The automatic stay also does not protect cosigners and guarantors of the person filing, and a creditor may continue to collect debts from those persons after the case is filed. Persons who have had a prior bankruptcy case dismissed within the past year may be denied the protection of the automatic stay.

7. How does filing a chapter 7 case affect a person's credit rating?
It will usually worsen it, if that is possible. However, some financial institutions openly solicit business from persons who have recently filed under chapter 7, apparently because it will be at least 8 years before they can file another chapter 7 case. If there are compelling reasons for filing a chapter 7 case that are not within the person's control (such as an illness or an injury), some credit rating agencies may take that into account in rating the person's credit after filing.

8. Are employers notified of chapter 7 cases?
Employers are not usually notified when a chapter 7 case is filed. However, the trustee in a chapter 7 case often contacts an employer seeking information as to the status of the person's wages or salary at the time the case was filed or to verify a person's current monthly income. If there are compelling reasons for not informing an employer in a particular case, the trustee should be so informed and he or she may be willing to make other arrangements to obtain the necessary information.

9. What is exempt property?
Exempt property is property that is protected by law from the claims of creditors. However, if exempt property has been pledged to secure a debt or is otherwise encumbered by a valid lien or mortgage, the lien or mortgage holder may claim the exempt property by foreclosing upon or otherwise enforcing the creditor's lien or mortgage. In bankruptcy cases property may be exempt under either state or federal law. Exempt property typically includes all or a portion of a person's unpaid wages, home equity, household furniture, and personal effects. Your attorney can inform you as to the property that is exempt in your case.

10. When must a person appear in court in a chapter 7 case and what happens there?
The first court appearance is for a hearing called the "meeting of creditors," which is usually held about a month after the case is filed. The person filing the case must bring photo identification, his or her social security card, his or her most recent pay stub and all of his or her bank and investment account statements to this hearing. At this hearing the person is put under oath and questioned about his or her debts, assets, income and expenses by the hearing officer or trustee. In most chapter 7 consumer cases no creditors appear in court; but any creditor that does appear is usually allowed to question the person. For most persons this will be the only court appearance, but if the bankruptcy court decides not to grant the person a discharge or if the person wishes to reaffirm a debt, there may be another hearing about three months later which the person will have to attend.

11. What happens after the meeting of creditors?
After the meeting of creditors, the trustee may contact the person filing regarding his or her property and the court may issue certain orders to the person. These orders are sent by mail and may require the person to turn certain property over to the trustee, or provide the trustee with certain information. If the person fails to comply with these orders, the case may be dismissed, in which case his or her debts will not be discharged. The person must also attend and complete an instructional course on personal financial management and file a statement with the court showing completion of the course.

12. What is a trustee in a chapter 7 case, and what does him or she do?
The trustee is a person appointed by the United States trustee to examine the person who filed the case, collect the person's nonexempt property, and pay the expenses of the estate and the claims of creditors. In addition, the trustee has certain administrative duties in a chapter 7 case and is responsible for seeing to it that the person filing performs the required duties in the case. A trustee is appointed in a chapter 7 case, even if the person filing has no nonexempt property.

13. What if a person has no nonexempt property for the trustee to collect? 
If, from the bankruptcy forms filed, it appears that the person filing has no nonexempt property, a notice will be sent to the creditors advising them that there appears to be no assets from which to pay creditors, that it is unnecessary for them to file claims, and that if assets are later discovered they will then be given an opportunity to file claims. This type of case is referred to as a no-asset case. Most chapter 7 cases that are filed by consumers are no-asset cases.

14. May a utility company refuse to provide service to a person if the company's utility bill is discharged under chapter 7?
If, within 20 days after a chapter 7 case is filed, the person filing furnishes a utility company with a deposit or other security to insure the payment of future utility services, it is illegal for a utility company to refuse to provide utility service to the person after the case is filed, or to otherwise discriminate against the person, if its bill for past utility services is discharged in the person's chapter 7 case.

15. How is a person notified when his or her discharge has been granted?
The person is usually notified by mail. Most courts send a form called "Discharge of Debtor" to the person filing and to all creditors. This form is a copy of the court order discharging the person from his or her dischargeable debts, and it serves as notice that the discharge has been granted and that creditors are forbidden from attempting to collect discharged debts. It is usually mailed about four months after a chapter 7 case is filed.

16. What if a person wishes to repay a dischargeable debt?
A person may repay as many dischargeable debts as desired after filing a chapter 7 case. By repaying one debt, a person does not become legally obligated to repay any other debts. The only dischargeable debt that a person is legally obligated to repay is one for which the person and the creditor have signed what is called a "reaffirmation agreement."

17. What should a person do if a creditor later attempts to collect a debt that was discharged in his or her chapter 7 case?
When a chapter 7 discharge is granted, the court enters an order prohibiting creditors from later attempting to collect any discharged debt from the person filing. Any creditor who violates this court order may be held in contempt of court and may be liable to the person for damages. If a creditor later attempts to collect a discharged debt from the person, the person should give the creditor a copy of his or her chapter 7 discharge and inform the creditor in writing that the debt was discharged in the chapter 7 case. If the creditor persists, the person should contact an attorney. If a creditor files a lawsuit on a discharged debt, it is important to inform the court in which the lawsuit is filed that the debt was discharged in bankruptcy. The lawsuit should not be ignored because even though a judgment entered on a discharged debt can later be voided, voiding the judgment may require the services of an attorney, which could be costly.

18. How does a chapter 7 discharge affect the liability of cosigners and other parties who may be liable to a creditor on a discharged debt?
A chapter 7 discharge releases only the person or persons who filed the chapter 7 case. The liability of any other party on a debt is not affected by a chapter 7 discharge. Therefore, a person who has cosigned or guaranteed a debt for the person filing is still liable for the debt even if the person filing receives a chapter 7 discharge with respect to the debt.

19. How soon after you file can you buy a home?

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