In a Chapter 7 case, virtually all of your unsecured debt is discharged.  This includes credit card debt, unsecured loans, medical bills, most judgments as well as balances on repossessed property.  A Chapter 7 case differes from Chapter 13 where in a Chapter 13, a portion of your unsecured debt is paid back based based on "disposable income."  In a Chapter 7 case, however, your unsecured debt is discharged without regards to "disposable income" or how much you can afford to pay your creditors.  In a Chapter 7 case, a trustee is appointed to examine the debtor’s assets to determine if there are any assets not protected by available exemptions.  Exemptions are laws that allow a debtor to keep, and not part with, certain types and amounts of property.  For example, exemption laws allow a debtor to protect a certain amount of equity in the debtor’s residence, motor vehicle, household goods, life insurance, health aids, retirement plans, specific future earnings such as social security benefits, child support and alimony, and certain other types of personal property. If there is any nonexempt property, it is the trustee’s job to sell it and distribute the proceeds among the unsecured creditors.  Although a liquidation case can rarely help with secured debt (the secured creditor still has the right to repossess the collateral if the debtor falls behind in the monthly payments), the debtor will be discharged from the legal obligation to pay unsecured debts such as credit card debt, medical bills and utility arrearages.  However, certain types of unsecured debt are allowed special treatment and cannot be discharged.  These include most student loans, alimony, child support, criminal fines and most taxes.

Learn More About The Chapter 7 Procedure

If you are considering bankruptcy, we encourage you to seek the advice and assistance of an experienced San Francisco Bay Area bankruptcy attorney who practices California bankruptcy law before you decide to file.  At The Chernev Firm, we will provide you with a free bankruptcy consultation where you can talk to a bankruptcy lawyer about your options.