What Is Chapter 7 Bankruptcy?
A plain-English guide for debtors, attorneys, and aspiring bankruptcy petition specialists.
The basics
Chapter 7 of the United States Bankruptcy Code is a liquidation bankruptcy — meaning that in exchange for surrendering certain non-exempt assets to a trustee, most of your unsecured debts are legally eliminated (discharged). For the vast majority of individual filers, Chapter 7 results in a discharge of all qualifying debts within four to six months, with no repayment plan required.
Chapter 7 is named after the section of the U.S. Bankruptcy Code (11 U.S.C. Chapter 7) that governs it. It is the most commonly filed bankruptcy chapter in the United States, accounting for roughly 60% of all individual filings.
Who qualifies?
To file Chapter 7, an individual must pass the Means Test (11 U.S.C. § 707(b)). The Means Test compares the debtor’s average monthly income over the prior six months to the state median income for their household size.
- Below the state median: The debtor qualifies automatically. No further means test calculation is required.
- Above the state median: The debtor must complete a second calculation (Form 122A-2) using IRS-approved expense standards to determine whether disposable income is sufficient to repay debts. If disposable income is below the threshold, Chapter 7 remains available.
What gets discharged?
A Chapter 7 discharge eliminates the debtor’s personal liability for most unsecured debts, including:
- Credit card balances
- Medical and hospital bills
- Personal loans and lines of credit
- Payday loans
- Utility bills in arrears
- Lease deficiency balances
- Most civil court judgments
- Collection agency accounts
- Most student loans
- Child support and alimony
- Most tax debts (within 3 years)
- Criminal fines and restitution
- Debts from fraud or willful misconduct
- Debts incurred after filing
The Chapter 7 timeline
The petition package — what gets filed
A complete Chapter 7 petition consists of the following official forms, all available free from the U.S. Courts at uscourts.gov:
| Form | Title | Purpose |
|---|---|---|
| 101 | Voluntary Petition | Initiates the case |
| 106 Summary | Summary of Assets & Liabilities | Totals from all schedules |
| 106A/B | Schedule A/B — Property | Everything the debtor owns |
| 106C | Schedule C — Exemptions | What the debtor keeps |
| 106D | Schedule D — Secured Creditors | Mortgage, car loans |
| 106E/F | Schedule E/F — Unsecured Creditors | Credit cards, medical, taxes |
| 106G | Schedule G — Executory Contracts | Leases, subscriptions |
| 106H | Schedule H — Codebtors | Co-signers on any debt |
| 106I | Schedule I — Income | All monthly income sources |
| 106J | Schedule J — Expenses | All monthly expenses |
| 107 | Statement of Financial Affairs | 2-year financial history |
| 108 | Statement of Intention | What to do with secured property |
| 121 | Social Security Statement | Filed under seal |
| 122A-1 | Current Monthly Income | Means test part one |
| 122A-2 | Means Test Calculation | Required if above median only |