Basics of a No Asset Chapter 7 Case

A Chapter 7 bankruptcy, also known as straight bankruptcy or no asset bankruptcy, is a debt liquidation proceeding that allows a debtor to eliminate most of his unsecured debts.  Because the majority of a Chapter 7 debtor’s assets are exempt, there is simply nothing left for distribution to unsecured creditors, therefore, allowing the debtor to wipe out most of those debts completely. 

Who Qualifies for Chapter 7 Bankruptcy?

Any individual residing, domiciled, or having business property in the U.S. may file a Chapter 7 case.  Businesses may also file Chapter 7 bankruptcy.  However, individual debtors must pass either the median income or means test to qualify for Chapter 7 bankruptcy. 

The Process

A Chapter 7 bankruptcy is initiated by filing a Chapter 7 bankruptcy petition along with the required schedules, pre-bankruptcy counseling certificate, and payment advices.  At the time the case is filed, the debtor must pay the filing fee of $299.00 or file an Application to Pay Filing Fee in Installments.  If the debtor wishes to pay the filing fee in installments, he must pay the entire fee in a maximum of four installments.  The filing fee must be paid in full within 120 days of the date the petition was filed.  For good cause shown, the bankruptcy court may extend the time to pay the filing fee to 180 days. 

The Meeting of Creditors will take place about 30 days after the bankruptcy petition is filed.  The debtor’s attendance at the Meeting of Creditors is mandatory.  The bankruptcy trustee and any creditors who choose to appear will question the debtor about his income, assets, and debts.  The debtor’s testimony is given under oath and recorded. 

The debtor must complete a pre-discharge counseling class within 45 days of the date first set for the Meeting of Creditors and must file the certificate of completion with the court.  Most debtors receive a discharge about 90 days after filing Chapter 7 bankruptcy. 

Getting Legal Help

Bankruptcy is meant to give debtors a fresh start.  However, to get that fresh start, debtors must comply with the strict requirements of the Bankruptcy Code.  Therefore, it’s best to hire an experienced bankruptcy attorney who will prepare and file the petition and schedules and ensure that all legal and procedural requirements are met.