What are the basic steps in a Chapter 7 bankruptcy?

1. Review your debt obligations.

Child support and certain other debts are not discharged in a Chapter 7.  Student loans and taxes may be discharged but only extremely limited circumstances.



2. Analyze exemptions that may apply to your property.

Each state has at least two possible set of "exemptions."  Often, one is Federal and one is state.  California, to the contrary, has two state exemption systems.  Putting property side-by-side with the exemptions will give you a good idea of what property the Chapter 7 Trustee may decide to sell.

3. Pass the "Means Test."

If your average income during the six months before you file is more than the median income for a family of your size in your state, you may not be allowed to use Chapter 7.  When you make more than median, we run further calculations to see if you can still opt for a Chapter 13.

Try this means test caclulator from Nolo press:  calculator.

4. Redeem or reaffirm secured debts.

For debts that were "secured" by property, you will nee to decide if you are going to pay something on the debt or  "reaffirm" the debt (agree on new contract terms with the creditor), or "surrender" the property (let the creditor take it -- if the property is worthless, the creditor may not bother). There are many options that are between these positions.
 
5. Fill out the bankruptcy forms.

You complete a few dozen pages of forms, in which you tell the court about all of your property, debts, income, and expenses. You'll list the names of all your creditors, note which debts are disputed, decide what property you are claiming as exempt, and decide what you want to do about each of your secured debts.

6. File the forms.

Filing your petition (the main bankruptcy form) officially starts your case.

7. Go to a meeting.

In most cases, you'll need to go to court only once, for a short meeting with the trustee (and perhaps a creditor or two) to review your case and answer any questions about the information in your forms.

8. File objections or motions if needed.

If you dispute a creditor's claim against you or you want to eliminate certain liens, you'll need to address these matters before your bankruptcy case is closed.

9. Wind up your secured debts.

When you filed your bankruptcy forms, you completed a form in which you stated how you intended to handle your secured debts. Before your case is closed, you'll need to act on these matters.

10. Get your discharge.

Congratulations! This is what it's all about. At the end of a successful bankruptcy, the court will issue an order saying that your dischargeable debts are officially discharged. Once a debt is discharged, you no longer have a legal obligation to pay it and the creditor has no legal right to demand it.