Chapter 7 Bankruptcy

If you are looking for a Chapter 7 bankruptcy attorney in Los Angeles please feel free to give us a call today. You may also be interested in The Ultimate Guide to California Bankruptcy.

What is Chapter 7 Bankruptcy?

Chapter 7 is the traditional liquidation or “straight” bankruptcy. In all Chapter 7 cases, a trustee is designated by the court to administer the debtor’s nonexempt assets for the benefit of the debtor’s creditors.


Individuals are qualified as Chapter 7 debtors if they have a domicile, a place of business, or property in the United States. Note that citizenship is not required.

Discharge in Prior Case

You are eligible to receive a discharge in Chapter 7 Bankruptcy even if you previously received a Chapter 7 Bankruptcy discharge, as long as the prior Chapter 7 case in which you received a discharge was filed at least eight years before the filing of your new Chapter 7 case. You can also receive a Chapter 7 discharge in your current case if you previously filed for Chapter 13 Bankruptcy, so long as the prior Chapter 13 case in which you received a discharge was filed at least six years before the filing of your new Chapter 7 case.

Credit Counseling Requirement

For cases filed after October 17, 2005, you must obtain a certificate from an approved credit counseling agency before you can file your case. This can be done over the internet and will likely cost approximately $35-$45. Your attorney will provide you with information on how to obtain this counseling.

An individual cannot file a Chapter 7 case unless, during the 180-day period before filing, he or she has received an individual or group briefing from and approved nonprofit budget and credit counseling agency.

Automatic Stay

When a debtor files for bankruptcy, something called the “automatic stay” immediately stops any lawsuit filed against the debtor and virtually all actions against the property by a creditor, collection agency or government entity. Especially if a debtor is at risk of being foreclosed on, losing such basic resources as welfare or unemployment benefits, or a driver’s license or a job (because of a raft of wage garnishments), the automatic stay provides immediate protection.

Financial Management Course

For cases filed after 10/17/2005, you are required to complete a financial management course before receiving your discharge. You must have completed this course (usually about 2 hours) and submitted the certificate of completion to the court no later than 45 days after the date first set for your meeting with the Trustee. IF you fail to do this, you will NOT get a discharge.

Chapter 7 Bankruptcy FAQs

Am I allowed to spend money before filing for Chapter 7?

The important thing to remember is to NOT rack up new debt. Of course, you might have sold property before you filed your bankruptcy case to pay your expenses, such as your rent, food, or utilities, and doing so isn’t wrong on your part. Be prepared to explain all of your transactions, and, when appropriate, provide supporting documentation.

If you pay back loans to friends or relatives within on year of filing, or even other creditors within 90 days of filing, then this may be considered a “preferential transfer.” A preferential transfer can be “undone” in bankruptcy.

You can protect most retirement funds in bankruptcy. Therefore, one of the most unfortunate financial mistakes that people regularly make before filing for bankruptcy is withdrawing retirement funds to pay off debt that bankruptcy could wipe out.

How much debt do I need to file Chapter 7?

Over the years I’ve been asked many variations of this question from potential bankruptcy clients. Many think there is an actual minimum amount of debt required before one is eligible to file a bankruptcy case. There is no minimum debt requirement to file bankruptcy under any of the chapters.

Although, there are no restrictions in wither Chapter 7 or Chapter 11 bankruptcy cases. But Chapter 13, however, limits the amount of debts you have to $394,725 of unsecured debts which are non-contingent and liquidated (a definite calculated amount) and $1,184,200 secured debts which are non-contingent and liquidated.

What happens after you file Chapter 7?

Many times, because of court ordered payment plans and consequences to credit histories, what happens after Chapter 7 bankruptcy ( Depends on what debt is discharged in the bankruptcy.

Most unsecured debt, like credit card debt, can be discharged in bankruptcy. EXCEPTIONS include:

  • Government funded student loans
  • Certain forms of tax debt
  • Federal tax liens
  • Child support
  • Alimony/spousal support
  • Debts for personal injury or death cause by debtor’s operation of a motor vehicle
  • Fines and penalties for violating the law
  • Certain tax-advantaged retirement plans
  • Cooperative housing fees

How long does the Chapter 7 process take?

In most cases, it takes approximately three to four months to complete a Chapter 7 bankruptcy and obtain a discharge. However, if you have a complex case or creditors object to your discharged, it can take longer.

What happens after the Chapter 7 process is complete?

From three to six months after you file, you’ll receive your bankruptcy discharge. A few days or weeks after your discharge is granted, your bankruptcy case will be officially closed, you will no longer be liable to all of your creditors, and you can move on with your debt-free life. This allows you to now rebuild your credit and get the most from your new debt-free status.

How long before my Chapter 7 bankruptcy falls off my credit report?

A Chapter 7 bankruptcy typically shows on your credit report for ten years from the date that your bankruptcy case was filed (not the date of discharge).

Sherman Oaks, CA

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Riverside, CA 92505
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Long Beach, CA

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Long Beach, CA 90802
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