Close this search box.

Articles & News

Understanding Chapter 7 Bankruptcy: A Fresh Start

Chapter 7 bankruptcy is a legal process designed to provide individuals overwhelmed by debt with a fresh start by liquidating their non-exempt, unencumbered assets to repay creditors. In most cases, an individual or a couple can retain all their assets and start fresh with new credit. Here’s a simplified breakdown of what you need to know:


To qualify for Chapter 7 bankruptcy, you must meet certain eligibility requirements. The main eligibility requirement focuses on an individual’s (or a married couple’s) income received over the 6 months prior to filing the bankruptcy. In order to qualify, an individual’s or a couple’s average income must be below the median income level for a household of their size, based on their location. This calculation is often referred to as the ‘Means Test.’ This test evaluates your disposable income after deducting allowable expenses.

An individual or a couple must have no disposable monthly income available after paying for all of their necessary and reasonable living expenses for themselves and any of their dependents in order to qualify for Chapter 7.

Automatic Stay

Upon filing for Chapter 7 bankruptcy, you’ll benefit from an automatic stay, which halts most creditor actions against you or your property. This means creditors cannot pursue collection efforts like foreclosure, repossession, or wage garnishment during the bankruptcy process, giving you some breathing room to address your financial situation.

Exempt vs. Non-Exempt Assets

Not all assets are subject to liquidation in Chapter 7 bankruptcy. Common exemptions include your primary residence, vehicles, household goods, and personal belongings. Make sure to consult with a bankruptcy attorney to understand which assets are protected in your case.

Debt Discharge

The most significant benefit of Chapter 7 bankruptcy is the discharge of eligible debts. Most unsecured debts, such as credit card balances and medical bills, can be discharged, relieving you of the legal obligation to repay them. Debts like child support, alimony, and student loans are typically not dischargeable.

Credit Impact

Chapter 7 bankruptcy will help you improve your credit score. Individuals typically see their credit begin to improve within three to six months after filing for Chapter 7. You will be able to lease or finance a new car right after your case is discharged.

Navigating Chapter 7 bankruptcy can be complex, but WBK Bankruptcy, powered by Wolfson Bolton Kochis, is here to help demystify the process and provide those who need it with the right guidance along this pathway to financial recovery.

Schedule Your FREE Consultation

By submitting, you agree to be contacted about your request. View our PRIVACY POLICY.

Previous Articles

Skip to content