Chapter 7 Bankruptcy


A Chapter 7 Personal Bankruptcy, often called a “straight Bankruptcy” involves an individual or married couple seeking the protection of the Bankruptcy Laws where they are hopelessly burned with debt and offers a fresh start by eliminating their debt through a Discharge. A Chapter 7 Bankruptcy proceeding may take as little as four to five (4-5) months after it is filed.

While a Chapter 7 Bankruptcy is known as a “liquidation proceeding”, in most cases individuals have no assets that would be sold as there are significant protections offered under New Jersey State and Federal Law against most clients valuable property such as their home, personal assets, retirement funds and automobiles. Once a Chapter 7 Bankruptcy is filed, creditors must immediately cease all efforts to collect a debt including continuation of any law suits, wage garnishments, bank levy or harassing telephone calls and letters.

You must be eligible to file for bankruptcy and the rules vary depending on the type of case you want to file. Bankruptcy laws changed in 2005.  There is a means test for individuals to qualify for Chapter 7 Bankruptcy. Your income and expenses are examined to see how they compare to the standard for your state.

For example, if you earn less than the median income for a family of your size in your state, you can file for Chapter 7 bankruptcy. If you earn more, a Chapter 13 case may be your option, where you pay part of your debts over time with your disposable income.

Eligibility also includes mandatory credit counseling and budget analysis. This will address the means testing calculations for you. While there are calculators available on the internet, a bankruptcy attorney is often the best resource to help size up your situation and options.

Bankruptcy starts with filing an official petition, schedules and Statement of Financial Affairs in bankruptcy court. You must provide:

  • A full list of creditors, along with their claim types and amounts
  • The source, amount and frequency of your income
  • A list of all your property
  • A detailed list of monthly living expenses

Bankruptcy law forces creditors to stop all collection efforts against you as soon as your file. This mechanism is called the “automatic stay” and it’s one of the main benefits of bankruptcy. Everything is put on hold, and you get much-needed breathing room.  The automatic stay also prevents creditors from filing new lawsuits against you.

A business may also file a Business Chapter 7 Bankruptcy.    This should not be confused with an individual who owns or operates a business filing bankruptcy.   The application of the Bankruptcy Code to a business is often very different than an individual and should only be considered with the assistance of an experienced bankruptcy attorney.   You can Read More Here about a Business Chapter 7 Bankruptcy.

 The information set forth above is not legal advice which can be provided to you only after a full review and evaluation by an attorney of your particular circumstances and the remedies which may be available.