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Chapter 7 bankruptcy is designed to give overwhelmed debtors "a fresh start" — relief from unmanageable debts. Without such debt relief, individuals in financial trouble often find themselves sinking deeper and deeper into debt each month despite their good faith efforts to repay past-due loans.
Discharged Debts Are Wiped Out
The ultimate goal of a Chapter 7 bankruptcy is to have as many debts as possible discharged. This will mean that the debts no longer exist and creditors can never again seek to collect on them. Chapter 7 is sometimes called "the debt discharge bankruptcy" because this is its core feature. (Chapter 13 bankruptcy, on the other hand, involves repayment of some or all debt over several years' time, followed by a discharge of debt that remains at the end of the repayment period.)
If you are contemplating filing a Chapter 7 bankruptcy, keep in mind that certain financial obligations are not dischargeable, including:
- Student loans
- Most taxes
- Child support
- Alimony
- Debts incurred through fraud
Dischargeable Debts
However, most debtors who file Chapter 7 manage to have large amounts of consumer debt discharged within a few months of filing bankruptcy:
- Credit card balances
- Medical bills
- Installment loans, including bank loans used for any unsecured purpose
- Car loans (although many Chapter 7 filers do reaffirm their car loans after bankruptcy and keep their cars)
341 Creditors' Meeting
A few weeks after a Chapter 7 filing, a Chapter 7 filer, accompanied by an attorney, will appear at a meeting of creditors known as the 341 meeting. In fact, creditors almost never show up at these meetings. Rather, a trustee appointed by the bankruptcy court asks a bankruptcy filer to acknowledge an understanding of the potential consequences of seeking a discharge of debts in bankruptcy. The trustee asks the petitioner to confirm and clarify under oath the facts contained in the bankruptcy petition. The trustee will usually ask the petitioner to produce certain documents at, or prior to the hearing, and the petitioner may have to provide information or documentation after the hearing to follow up on the trustee's concerns raised at the hearing.
Notification of Discharge From the Bankruptcy Court
A couple of months after the 341 creditors' meeting — approximately three or four months after a Chapter 7 filing — a relieved debtor can expect to receive notification that all debts included in the bankruptcy have been discharged. This is a successful conclusion of a Chapter 7 bankruptcy case. Get a clear understanding of the meaning of the Chapter 7 discharge. Contact Prescott & Pearson, P.A.
Serving Minnesota Since 1975: Duluth, St. Cloud, Rochester, St. Paul, Minneapolis · Chapter 7 Bankruptcy Attorneys
- Minneapolis-St. Paul Area: 651-968-8096
- Minnesota Toll-Free: 888-366-0827
Consultations are free at Prescott & Pearson, P.A. Call or e-mail us today to learn more about your debt relief options, including Chapter 7 and Chapter 13. Our bankruptcy lawyers offer quality services at competitive rates and effective representation statewide.
