Chapter 7 Liquidiation

The first type of personal bankruptcy is Ch. 7, in which your unsecured debts are completely eliminated.  Unsecured debts are those items such as credit cards, personal loans, lines of credit, medical bills, utilities and even parking tickets.  In a Ch. 7 bankruptcy, you literally get a fresh start.  The process takes approximately 4-5 months, and as soon as your discharge is granted, all of your debts are wiped out, giving you a clean slate.  Also, if you currently own a house and/or car, and your payments are current, you are not at risk for losing either of them in a bankruptcy.

Most Ch. 7 cases are described as no-asset cases, meaning that all of their property is exempt from seizure under either the Federal or Pennsylvania exemptions. 

 THE BANKRUPTCY PROCESS (CHAPTER 7)
In a typical Ch. 7 bankruptcy, the process is as follows:

1.  Complete a credit counseling course from an approved agency.  The pre-filing course must be taken within the 6 months prior to filing your bankruptcy petition.  See here for a list of approved agencies in your area.

2. The first step actual step in the bankruptcy process is the filing of the bankruptcy petition.  When a petition is filed, an automatic stay goes into effect, protecting the Debtor from harassment and their property from all types of collection activity by their creditors.

3. Next, the Debtor will attend the Meeting of Creditors.  A typical Debtor will not appear in Court, or be seen in front of a judge.  In both types of personal bankruptcy, the Debtor will appear at an informal proceeding, called the 341 Meeting of Creditors.  This hearing, which is named after Section 341 of the Bankruptcy Code, is held 20-40 days after the petition is filed.  The Debtor is required to attend this hearing and is questioned by the Bankruptcy Trustee and/or any creditors that choose to attend (although they almost never do).  This proceeding is very short, lasting typically 3-5 minutes.

4. Complete your Pre-discharge credit counseling or money management course within 45 days of the first scheduled Meeting of Creditors.

5. Within 60-75 days after the Meeting of Creditors you will receive a discharge.  A discharge is a release of the debtor from personal liability for their debt.  A discharge is a permanent order directing the creditors to refrain from taking collection activity against the Debtor.