Chapter 7 Bankruptcy

The type of bankruptcy most often associated with a “fresh start,” or Chapter 7 bankruptcy, allows debtors to wipe out certain debts (like credit card balances, personal loans, and medical bills) without paying into a monthly repayment plan.

The debtor must agree to allow the individual responsible for overseeing the case (the bankruptcy trustee) to sell certain, “nonexempt” property. One job of the trustee is to distribute those funds to the creditors based on a priority ranking system.

Typically, a debtor doesn’t have to relinquish any assets. You will be allowed to keep things that are necessary to continue work and maintaining a home, such as household furnishings, clothing, and some equity in your house and a vehicle. In many cases, chapter 7 filers can keep all of their property. Each state, including Ohio, determines what property its residents can keep.

Unfortunately, a Chapter 7 bankruptcy doesn’t discharge all debt. Certain types of debt are considered non-dischargeable, which remains with you even after bankruptcy, and until it’s paid. These types of non-dischargeable debt include:

• Income taxes incurred within the past three years, and possibly older taxes.
• Student loan debt, unless you can demonstrate that it would be difficult or unfair to require repayment.
• Domestic support obligations, like child support or alimony/spousal support.
• Wrongful death or injury awards incurred from operating a vehicle while under the influence.

Consumers and businesses may file Chapter 7 bankruptcy. A typical case may take four to six months to complete.