Chapter 7 of the Bankruptcy Code is also known as a “straight bankruptcy.” It allows for the discharge of debts, which releases individual debtors from personal liability for most debts and prevents the creditors owed those debts from proceeding with any collection actions against the debtor. Under the Chapter 7 a Trustee is appointed to review the documents filed with the court to determine if there are any un-exempt assets to be liquidated for the benefit of the creditors.
After a Chapter 7 is filed, a date is set for review of the schedules filed with the court by a trustee appointed to administer your case. Approximately one month after the case is filed, you and your spouse, if you filed jointly, will appear at the trustee’s office for a meeting called a 341 meeting, referring to the section of the code requiring the meeting, with your attorney for a review of the papers filed. This hearing usually lasts less than fifteen minutes. This may be the only appearance at which you may need to be present for. Your attorney will advise you if it is necessary to attend any other court hearings. All debtors must complete a court approved instructional course concerning financial management to receive their discharge. After the 341 meeting, typically the trustee will file a “no asset report” indicating to the judge that there are no assets to be sold for the benefit of your creditors. Once this has been done, the court will sign a discharge order. This discharge order relieves you of any obligation to pay any of your discharged creditors. The Chapter 7 discharge does not eliminate some 19 categories of debts. The most common types of non dischargeable debts are:
- Debts due on certain types of tax claims
- Debts for spousal or child support or alimony
- Debts for willful and malicious injuries to person or property
- Debts to governmental units for fines and penalties
- Debts for most educational loans or benefit overpayments
- Debts for personal injury caused by the debtor’s operation of a motor vehicle while intoxicated
- Debts owed to certain tax-advantaged retirement plans
- Debts for certain condominium or cooperative housing fees.