Understanding Chapter 7 Bankruptcy – A Fresh Start
- Rebecca S. Wright
- Sep 1
- 2 min read
Updated: Sep 4
What Is Chapter 7 Bankruptcy? Who qualifies, What Debts can be Included, and How it Works
Chapter 7 bankruptcy is often called a “liquidation,” but in reality, most people don’t lose anything they own. Instead, it’s a way to wipe out unsecured debts quickly and get a clean slate. This post will hopefully give you a better understanding of Chapter 7 bankruptcy and whether it's right for you.
Who Typically Files Chapter 7 Bankruptcy?
People struggling with credit card debt, medical debt, judgments, student loan debt, and other types of debt.
Those who don’t have significant disposable income to put toward repayment.
Individuals facing lawsuits, garnishments, or constant collection calls.
What types of debt are included?
Unsecured Debt - this is debt that doesn't have collateral associated with it, such as credit cards or personal loans.
Medical Debt
Debt owed because of a civil lawsuit or judgment against you.
Debt associated with property you don't want to keep.
What types of debt typically can't be included?
Even with these types of debt, you can still file for Chapter 7, but the debts will remain after the discharge.
Family maintenance payments such as alimony and child support.
Criminal or civil restitution.
Tax debt.
Debt associated with certain property you want to keep.
Will I lose my house or car?
It depends. Bankruptcy exemptions are rules that protect the things you need to live, like your home, car, clothes, and household items. Exemption amounts vary by state. Exemptions make sure you don't lose everything if you file for bankruptcy. In most cases, people keep almost all of their property because of these exemptions. For high-value items like homes and cars, you can sign a reaffirmation agreement - a promise to the lender that you'll keep making payments - so you can keep your house, car, or other property.
The Process in Plain English
Preparation: With your attorney, you’ll gather financial documents and prepare your petition.
Filing: Once your case is filed, the automatic stay begins—collections, garnishments, repossessions, and lawsuits must stop.
Meeting of Creditors: About a month later, you’ll attend a short meeting to answer basic questions about your finances. This is called the "341 meeting." In Wyoming, these meetings take place over Zoom.
Waiting Period: Creditors can raise objections, but this is rare.
Discharge: After about 2–4 months, your qualifying debts are permanently erased.
Why Chapter 7 May Be Better Than a Debt Program
Debt management companies cannot force creditors to stop interest, fees, or lawsuits. With bankruptcy, your relief is backed by federal law. For more information on this topic, check out our other blog posts.
Life After Chapter 7
Many people fear they’ll never recover financially, but the truth is: your credit can start improving almost immediately once the debt burden is lifted. Chapter 7 is about giving honest people a second chance and a financial fresh start.
