Business & Finance Bankruptcy

What Is Chapter 7 Bankruptcy?

    Means Testing

    • Filers of Chapter 7 bankruptcy must pass a federal means test (see Resources section) in order to pursue their case. Those who make too much money must repay part of their debts through Chapter 13 bankruptcy.

    Student Loans

    • Government student loans can rarely be included in Chapter 7. Exceptions are made if a permanent disability hindering repayment is proven and accepted by the court, or if the school has since ceased operations.

    Family Debts

    • Family debts such as alimony and child support may not be included in a Chapter 7 bankruptcy case.

    Credit Counseling

    • To successfully pursue Chapter 7 bankruptcy, a debtor must complete an approved credit counseling course (see Resources section) and prove this to the court.

    Credit Effects

    • Chapter 7 bankruptcy is listed on a consumer's credit file for 10 years, but the debts included will show a zero balance on the reports.


    • Most personal property can be kept in a Chapter 7 case, including retirement accounts. However, stocks and home equity are usually seized to help counteract any creditor losses.


    • Taxes less than three years old may not be included in a Chapter 7 bankruptcy proceeding. In addition, charging items 90 days or less before filing Chapter 7 is not advised, as this could lead to an accusation of bankruptcy fraud.

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