What is chapter 7 bankruptcy?
Chapter 7 bankruptcy is a federal court process that eliminates most unsecured debts — credit cards, medical bills, personal loans. Discharge is typically issued 60 to 90 days after the meeting of creditors (U.S. Courts, Chapter 7 Bankruptcy Basics). A court-appointed trustee liquidates non-exempt assets to pay creditors, though most filers keep everything they own because their property falls within state exemption limits. You must pass the means test to qualify.
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Key facts
- About 96% of Chapter 7 filers receive a discharge — the court order that permanently eliminates qualifying debts — with the median case completing in approximately 100 days from filing.
- Chapter 7 cases per Chapter 13 case filed in U.S. bankruptcy courts was 1.79 over the 12 months ending Q3 2026 (our calculation from Administrative Office of the U.S. Courts counts; business and personal cases combined). A filing is not a discharge, and the means test shapes which chapter a filer can use.
- Chapter 7 can end your personal liability on mortgage debt, but a valid mortgage lien generally survives. Student loans, child support, alimony, recent taxes and debts from fraud generally survive the discharge too.
- A Chapter 7 filing usually puts an automatic stay in place that pauses most collection activity, including foreclosure proceedings, wage garnishment, and creditor lawsuits, while it lasts — though the stay only delays foreclosure, it does not cure the default, and a lender can ask the court to lift it.
- Chapter 7 remains on your credit report for 10 years from the filing date, but most filers see credit score recovery within 12-24 months as the eliminated debt improves their debt-to-income ratio.
How the process works
Related data
- Bankruptcy Filings YoY Change →11.4%, Q3 2026
- Bankruptcy Chapter 7 to Chapter 13 Filing Ratio →1.79 times, Q3 2026
How Does Chapter 7 Bankruptcy Work?
Chapter 7 bankruptcy follows a structured process under Title 11 of the U.S. Code:
- Credit counseling: You must complete a credit counseling course from an approved agency within 180 days before filing. This is generally a federal requirement, with exceptions and temporary emergency deferrals.
- Filing the petition: You file a petition with the bankruptcy court, along with schedules listing all debts, assets, income, expenses, and recent financial transactions. The filing fee is $338 (as of 2024).
- Automatic stay takes effect: The moment you file, an automatic stay usually puts most collection activity on hold — phone calls, lawsuits, wage garnishment, even foreclosure proceedings already in progress — with limits for repeat filers and when a creditor asks the court to lift it.
- Trustee appointment: The court appoints a Chapter 7 trustee to review your case, identify non-exempt assets, and distribute any proceeds to creditors.
- 341 Meeting of Creditors: About 30-45 days after filing, you attend a brief meeting where the trustee and any creditors can ask questions under oath. Most meetings last 5-10 minutes.
- Discharge: If no objections are filed, the court issues a discharge order approximately 60 days after the 341 meeting, permanently eliminating qualifying debts.
What Debts Does Chapter 7 Eliminate?
Chapter 7 eliminates most unsecured debts:
- Dischargeable: Credit card debt, medical bills, personal loans, utility bills, some older tax debts, deficiency balances from repossession or foreclosure, and most civil judgments
- Not dischargeable: Student loans (except in rare hardship cases under the Brunner or totality-of-circumstances test), child support, alimony, recent tax debts (generally within 3 years), debts from fraud or willful injury, DUI judgments, and government fines
Will I Lose My Home in Chapter 7?
Chapter 7 does not save homes from foreclosure the way Chapter 13 does. The automatic stay temporarily pauses foreclosure, but the lender can file a motion for relief from stay — typically granted within 30-60 days. If you are current on your mortgage and your equity falls within your state's homestead exemption, you can keep your home. If you're behind on payments, Chapter 7 has no repayment plan to cure the default. Chapter 13 gives you a way to catch up on missed payments over time.
For homeowners facing foreclosure, Chapter 7 may still be strategic: it eliminates other debts (credit cards, medical bills) to free up income for mortgage payments, and it can eliminate personal liability on a mortgage you plan to surrender, preventing a deficiency judgment.
Chapter 7 vs. Chapter 13: Which Is Right?
The choice depends on your goals:
- Choose Chapter 7 if: You want a fresh start quickly, have primarily unsecured debt, pass the means test, and do not need to catch up on mortgage arrears
- Choose Chapter 13 if: You want to try to keep your home and cure a mortgage default, have regular income, have non-exempt assets you want to protect, or your income is too high for the means test
Chapter 7 takes 3-4 months. Chapter 13 takes 3-5 years. Chapter 7 requires passing the means test. Chapter 13 requires sufficient disposable income to fund a repayment plan.
State-by-state differences
While bankruptcy is federal law, state exemption laws vary dramatically, determining what property you keep in Chapter 7. Some states also allow choosing between state and federal exemptions.
| State | Key difference |
|---|---|
| Texas | Unlimited homestead exemption (up to 10 acres urban, 200 acres rural). Also allows unlimited personal property exemptions for families. One of the most debtor-friendly states — most Chapter 7 filers keep all their property. |
| California | Two exemption systems (System 1 and System 2, CCP §703 and §704). System 1 includes a wildcard exemption up to ~$33,000. Homestead ranges from $300K-$600K depending on county median home price. Filers choose one system per case. |
| Florida | Unlimited homestead exemption (Art. X §4, Florida Constitution) for up to ½ acre in a municipality. Personal property exemption of $1,000 ($4,000 wildcard if not claiming homestead). Must have owned home for 1,215+ days for full exemption. |
| New York | Homestead exemption ranges from $89,975-$179,950 depending on county (CPLR §5206). Filers may choose state or federal exemptions. Federal exemptions include a wildcard base of $1,675 plus up to $15,800 of unused homestead. |
| Georgia | Relatively modest exemptions: $21,500 homestead (O.C.G.A. § 44-13-100), $5,000 personal property, $1,200 vehicle. Must use state exemptions — federal exemptions not available. Trustees more likely to find non-exempt assets. |
Questions about Chapter 7 bankruptcy
How long does Chapter 7 bankruptcy take?
Most Chapter 7 cases complete in 3-4 months from filing to discharge. The 341 Meeting of Creditors occurs about 30-45 days after filing, and the discharge is issued approximately 60 days after that. However, if the trustee identifies non-exempt assets or a creditor objects, the case can take longer.
Can I file Chapter 7 if I own a home?
Yes. Home equity covered by your state's homestead exemption is protected from being used to pay unsecured creditors. However, Chapter 7 does not cure mortgage defaults — if you are behind on payments, the lender can still foreclose after the automatic stay is lifted. Chapter 13 is usually better for homeowners trying to save their home from foreclosure.
What is the means test for Chapter 7?
The means test compares your household income to your state's median income. If your income is below the median, you pass automatically. If above, a second calculation deducts allowed expenses to determine disposable income. If your debts are mainly consumer debts and your disposable income is too high under the means test, the court may find that granting relief would be an abuse. It may then dismiss your case or, with your consent, convert it to Chapter 11 or 13.
How much does it cost to file Chapter 7 bankruptcy?
The court filing fee is $338. Attorney fees typically range from $1,000-$3,500 depending on the complexity and location. The required credit counseling and debtor education courses cost $25-$50 each. Fee waivers are available for filers below 150% of the federal poverty guidelines.
Can I file Chapter 7 again after a previous bankruptcy?
To receive another Chapter 7 discharge after a prior Chapter 7 discharge, you generally must wait 8 years between the filing dates of the two cases. If you previously filed Chapter 13, you must wait 6 years from the Chapter 13 filing date (unless you paid 100% of unsecured claims or 70% with a good-faith best effort).
Related terms
- Chapter 13 BankruptcyA bankruptcy process in which a person with regular income proposes a plan to repay debts over time.
- Automatic StayA bankruptcy protection that generally pauses collection, foreclosure, and some lawsuits when a case is filed.
- Means TestAn income test that helps determine if you qualify for Chapter 7 bankruptcy by comparing your income to your state's median and, if it is above the median, considering allowed expenses.
- DischargeA court order that permanently eliminates your legal obligation to pay certain debts at the end of a successful bankruptcy case.
- ReaffirmationA voluntary agreement to remain responsible for a specific debt after bankruptcy — usually to keep property like a car. Court approval may be required.
- TrusteeA neutral third party who handles the foreclosure sale in non-judicial foreclosure states. Also manages bankruptcy cases.
- ForeclosureThe legal process where a lender takes your home after you stop making mortgage payments. The process and timeline vary significantly by state.
- DefaultA serious failure to meet the terms of your mortgage — usually missing several payments. Default is what triggers the foreclosure process.
Sources and method
- U.S. Courts — Chapter 7 Bankruptcy Basics, at uscourts.gov
- American Bankruptcy Institute — Filing Statistics, at abi.org
- Consumer Financial Protection Bureau — Bankruptcy Resources, at consumerfinance.gov
- National Consumer Law Center — Consumer Bankruptcy Law and Practice, at nclc.org
- U.S. Courts, at uscourts.gov
- Federal Rule of Bankruptcy Procedure 4004, Cornell Legal Information Institute, at law.cornell.edu
- 11 U.S.C. § 1123, Cornell Legal Information Institute, at law.cornell.edu
- 11 U.S.C. § 707, Cornell Legal Information Institute, at law.cornell.edu
We write with assistance from AI tools. Figures come from the data and sources named on this page.