How Bad Is Chapter 7 Bankruptcy Going To Be?

24 February 2023
 Categories: , Blog

Anyone who's going to meet a Chapter 7 bankruptcy attorney will want to know how bad things are going to be. Here is what a bankruptcy attorney typically tells clients.

Bankruptcy Isn't Inherently Bad

First, it's worth noting that a well-managed bankruptcy followed by reasonable post-bankruptcy financial behavior is supposed to be a good thing. This is an opportunity to reset your financial situation after years of burdens. Legally wiping the slate is initially tough, but it allows you to move on from debts that would otherwise weigh your financial life down forever.

Credit Counseling

The first small bit of pain will come in the form of credit counseling. American bankruptcy rules require petitioners to complete credit counseling before they can even file their cases. There is a small fee, but people without the means to pay can often get fee waivers. The system wants you to be sure that you know about and have exhausted other possible options before you file. Your Chapter 7 bankruptcy attorney will attach evidence that you completed the course.


People often worry about what's going to happen to their stuff. Legal references often call Chapter 7 bankruptcy a liquidation process. This means that the court will sell all of your non-exempt assets and use whatever money comes from the sale to pay your creditors.

Yes, the idea of someone selling all of your stuff sounds frightening. Foremost, be aware that it's a myth that the court will sell everything you own. You will get to keep exempt assets. Filers can request exemptions for clothing, furniture, a practice vehicle, and even the tools of their trade. Some states also have laws that allow exemptions of money and assets up to a statutory threshold. In other words, the court isn't going to leave you destitute.

The upside to liquidation is that it settles all of the outstanding debts if the court accepts the petition. As long as you name a creditor in the case and the judge grants the request, the court will discharge the associated debt in full. It ceases to exist legally, and the creditor can't come after you for it ever again.

Credit Record

The last pain point is a person's credit record. Chapter 7 bankruptcy goes on your credit record and stays there for up to 10 years. The discharged debts stay on your record for seven years if the creditor submitted them to a reporting agency before the court discharged them.

For more information, contact a bankruptcy attorney near you.