Chapter 7
The faster form of bankruptcy: what gets discharged, what you keep, and what to expect.
- How Chapter 7 works, beginning to endChapter 7 is the fast chapter: file, attend one short meeting about a month later, and receive a discharge wiping out most unsecured debt roughly four months after filing. Despite being called 'liquidation,' most cases liquidate nothing, because exemptions cover what filers own. The price of the speed: it helps less with catching up secured debts like a defaulted mortgage; that's Chapter 13's territory.
- When does the Chapter 7 discharge arrive, and what can delay it?The routine schedule: the court can enter the discharge once the 60-day objection window after your first 341 date closes, so most arrive roughly 60 to 75 days after the meeting, about four months after filing. The common delays are self-inflicted and fixable: the missing debtor-education certificate, an incomplete 341, or an open reaffirmation. Rare and serious: an objection or a trustee motion. And note: discharge and case closing are different events; asset cases stay open longer, which is normal.
- Keeping a car in Chapter 7: reaffirm, redeem, or just keep paying?Three doors. Reaffirmation re-signs you personally on the loan, giving up the discharge's protection for that debt; it's sometimes necessary and often a bad deal. Redemption pays the lender the car's current value in one lump sum and owns it outright, powerful for badly underwater cars if you can raise the cash. And in much of the country there's the quiet third door: stay current and keep driving without re-signing, where lender practice allows. Never reaffirm reflexively.
- What happens to my small business in Chapter 7?Depends what the 'business' is. A solo service business that's really your own labor (a trade, consulting, gig work) usually continues; tools are often exempt and you are not an asset. A business with real inventory, equipment, or receivables is property the trustee can close and liquidate. And an LLC or corporation is a separate question: your bankruptcy takes your ownership interest, not the company's assets, but the interest itself has value. Personal guarantees on business debt are usually what actually drives these filings.
- What is a 341 meeting?The 341 meeting, also called the meeting of creditors, is a short, recorded interview with the trustee assigned to your case, held about a month after you file. You answer questions under oath about your paperwork. It usually takes five to fifteen minutes, and creditors almost never show up.
The GoBK newsletter, in your inbox.
Practical information about bankruptcy and debt options.