How Does Chapter 7 Bankruptcy Work?
A Chapter 7 bankruptcy can eliminate most forms of debt including: credit card debt, car loans, medical bills, personal loans, utility bills, and claims from debt collection agencies. Debts that are not eligible for erasure include: child support, student loans, back taxes, alimony, and court fees. When you file for a Chapter 7 bankruptcy, the court places an automatic (and temporary) stay on your debts. This prevents creditors from collecting payments, seizing property, foreclosing homes, garnishing wages, etc. The courts then appoint a trustee to oversee your case.
The trustee reviews your finances, assets, and manages the sale of your nonexempt property to pay your debts (more on this shortly). The trustee also facilitates a meeting between you and your creditors to discuss the details of your filing. This process typically lasts 4-6 months from when you initially file. The court will discharge remaining eligible debts which means that you no longer have to repay them.