Filing for Chapter 7

• If you plan to file for Chapter 7 bankruptcy, you must first file a bankruptcy petition. After you file the bankruptcy petition, the bankruptcy court appoints a trustee to your case. The trustee's role is to gather as many of your assets as possible, sell them, and use the proceeds to pay your creditors. The trustee reviews the debtor's court filings and meets with the debtors at the first meeting of creditors to discuss the debtor's assets and financial obligations. The trustee then determines which of the debtor's assets are exempt and non-exempt.
  
  

Exemptions

• Each state has its own statutes enumerating what property would be exempt from being sold to pay off a debtor's creditors. The federal government has its own exemptions, as well. Some states give debtors a choice as to whether to use the state or federal exemptions. Federal exemptions are as follows: residential real or personal property up to $18,450; one motor vehicle valuing up to $2,925; up to $9,250 in aggregate value of household goods and furnishings, apparel, appliances, books, and animals, crops, or musical instruments; up to $1,225 in jewelry; up to $1,850 in tools of the trade; any unmatured life insurance contract; professionally prescribed health aids, and certain financial benefits.
  
  

Abandoned Property

• A trustee can elect to abandon certain property owned by the debtor. A trustee normally abandons property when the cost of selling the property would exceed the property's value. For example, if the debtor owns a broken down car, the trustee will abandon that car to the debtor. Such an item holds little market value.
  
  

Reaffirmation

• A reaffirmation agreement waives the discharge with respect to a certain item. The debtor continues to pay for the item in the agreed-upon terms. If before filing a Chapter 7 bankruptcy petition, a debtor had been paying for an item such as a motor vehicle, he would need to contact the car dealer about reaffirming the debt. That way, he can keep the vehicle and continue making payments on it, while the remainder of his debt is discharged and the remainder of his property is sold.
  
  

Discharge

• The trustee sells the non-exempt property, and uses the proceeds to pay unsecured creditors. Once the trustee has depleted these funds, most of the remaining unsecured debts are discharged. Unless an action to deny the debtor a discharge is filed within 60 days following the first meeting of creditors, the court will discharge the debtor's debts. Debts such as personal loans, credit cards, auto accident claims, and medical bills, among others are dischargeable. Student loans and domestic support obligations are not dischargeable.