Chapter 7n.
The most common form of bankruptcy: eligible debts are wiped out in a few months, with exemptions protecting most or all of an honest debtor's property.
Chapter 7 is the liquidation form of bankruptcy under the U.S. Bankruptcy Code. Everything the debtor owns and owes enters a bankruptcy estate; exemptions pull protected property back out, and any remaining non-exempt assets can be sold to pay creditors. For most consumer filers there is little or no non-exempt property, and the case ends with a discharge in roughly a few months.
Eligibility can require passing the means test. Chapter 7 offers the proverbial fresh start for the honest but unfortunate debtor.
Bankruptcy is federal (11 U.S.C. §§ 701 et seq.), filed in U.S. Bankruptcy Court: for Colorado residents, the District of Colorado; for Wyoming residents, the District of Wyoming. Exemptions are largely state-set, and Colorado's generous homestead exemption often makes a real difference in what a debtor keeps.
Related terms
- Chapter 13A bankruptcy that reorganizes debt into a three-to-five-year repayment plan — used to keep a house, catch up on arrears, or when income is too high for Chapter 7.
- automatic stayThe court order that takes effect the instant a bankruptcy is filed and immediately stops most collection efforts such as calls, lawsuits, garnishments, and foreclosures.
- bankruptcy estateEverything a debtor owns at filing, gathered into a single legal pool. Exemptions then pull protected property back out to the debtor.
- dischargeThe court order that legally wipes out a debtor's personal liability for covered debts, and it is the goal of most bankruptcies and the heart of the fresh start.