Standing up and taking action against your debt is a big decision. Before you commit to a plan of action, you need to make sure you have all the information you need.

To help you out, we provide a host of free resources that cover the basics of filing Chapter 7 bankruptcy. Here, you can learn more about:

• Chapter 7 bankruptcy laws
• Chapter 7 bankruptcy FAQ
• Chapter 7 bankruptcy forms
• About Chapter7.com

If you need specifics, we even take you through, in detail, the five steps of filing Chapter 7 bankruptcy. Start with Step 1.

You can also learn about the strong property protections Chapter 7 bankruptcy offers.

• What happens to your car during bankruptcy?
• How Chapter 7 bankruptcy works to protect your home

Bonus info: States with the strongest bankruptcy protections.

Get the Information You Need With a Chapter 7 Bankruptcy Lawyer

To get complete information on how bankruptcy works and how the laws in your state apply to you, speak with a local Chapter 7 bankruptcy lawyer.

A Chapter 7 bankruptcy lawyer can answer your questions about your case, your debt and the laws designed to help.

To speak with an attorney near you, simply complete the free bankruptcy case evaluation form on this page and we’ll connect you right away.

Two important facts to know about filing Chapter 7 bankruptcy and protecting your home are:

• The bankruptcy laws in every state provide specific protections for homes
• The automatic stay instantly puts a stop to foreclosure

There is a misconception that filing Chapter 7 bankruptcy means you have to give up your home, car, beloved possessions and the things you have worked hard for. This simply isn’t the case.

The truth is, bankruptcy laws vary widely from state to state and from case to case. Every bankruptcy case is different.

For better understanding of how filing bankruptcy can protect your home, keep reading or speak with a local bankruptcy lawyer about the laws in your state.

If you’re ready to get started taking action to protect your home and get out of debt, complete the free case evaluation form on this page and we’ll connect you with a local Chapter 7 bankruptcy lawyer right away.

The Bankruptcy Automatic Stay Stops Foreclosure

The bankruptcy automatic stay is a powerful court order that kicks in as soon as you file any type of bankruptcy, including Chapter 7.

The automatic stay was created to put a stop to all forms of collection by creditors, including:

• Foreclosure
• Repossession
• Wage garnishment
• Phone calls and letters
• Lawsuits

The automatic stay will be in effect for the duration of your case. This ensures that your home or property won’t be yanked out from under you while you are getting your finances in order with bankruptcy.

Chapter 7 Exemptions Are Designed to Protect Your Home and Precious Property

Chapter 7 bankruptcy is, in some ways, a bargain. The US Courts agree to wipe out all of your unsecured debts – things like credit card and medical bills. In exchange, your creditors are entitled to proceeds from a sale of some of your valuable assets, like an expensive car, for example.

However, in almost every personal Chapter 7 bankruptcy case there is no sale of any property of any kind.

Thanks to Chapter 7 bankruptcy exemptions, most or all of your property may be fully protected from sale or repossession, including your home and cars.

Exemptions vary from state to state, but each state’s bankruptcy code includes them. In most states, exemptions are very detailed, outlining what and how much property is protected. The same is true of what’s known as “homestead exemptions.”

In some states, like Texas, your main home and property is fully exempt (unless your house covers 10 acres inside a city!).

Most states set a maximum value for your home. If your home is worth that amount or less, then it should be fully protected. In some states, the limit is hundreds of thousands of dollars.

If you own several homes, vacation properties or a particularly expensive home that you want to protect then filing Chapter 13 bankruptcy may be a better option, which includes more home protection but requires more income.

Protect Your Home With Chapter 7 Bankruptcy Exemptions

If you are suffering under the weight of massive credit card and medical debt, then Chapter 7 bankruptcy may help you clear it all and get a fresh start. Plus, you likely won’t have to sacrifice your home.

To fully understand how Chapter 7 works and how the laws in your state can help you, speak with a local Chapter 7 bankruptcy lawyer. Simply complete the free case review form on this page and we’ll connect you right away.

Chapter 7 is most effective at wiping out debt related to credit cards, medical bills and other types of “unsecured debt.”

But bankruptcy can also offer strong protections for your property. Familiarize yourself with the laws and Chapter 7 bankruptcy exemptions in your state to maximize your filing.

To know exactly what can be protected through bankruptcy, speak with a local bankruptcy. Your lawyer can explain, in detail, exactly how the laws in your state will protect you and your home, car and other belongings.

Complete the free case evaluation form on this page and we’ll connect you right away with a local bankruptcy lawyer.

Why Chapter 7 Bankruptcy Exemptions Matter

To accomplish its instant elimination of debt, Chapter 7 bankruptcy allows for a sale of non-exempt property to cover debts. However, in most Chapter 7 bankruptcy cases, there is no sale of any property. That’s because the bankruptcy filer took advantage of state exemptions.

Exemptions outline the types and amounts of property that cannot be sold when you file Chapter 7 bankruptcy. For example, some states may let you keep a car worth up to $5,000 while other states may limit you to a vehicle values at $1,500.

Take a closer look at the states with the strongest bankruptcy protections.

You must complete an approved Debtor Education Course, which is a personal financial management course required by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.

Your Chapter 7 bankruptcy lawyer will be able to refer you to an approved financial management class or you can find an approved Debtor Education Course online at www.StartFreshToday.com.

This Debtor Education Course is mandatory in nearly all Chapter 7 bankruptcy cases.

In most instances, if you don’t proof that you completed the Debtor Education Course, you may not receive your Chapter 7 debt discharge.

Talk to a Chapter 7 bankruptcy lawyer about the requirements to receiving the debt discharge.

Filing Chapter 7 Bankruptcy Steps

• Back to Step 1
• Back to Step 2
• Back to Step 3
• Step 5

Your personal financial information, including all of your income, assets, expenses and debts will be required on your bankruptcy petition and on any related forms and schedules.

You will also have to include any applicable exemptions to which you are entitled.

You might be wondering how important it is to disclose all of your debts when seeking to file for Chapter 7 bankruptcy.

Whether a failure to list certain debts is an honest mistake or a deliberate action, trustees view bankruptcy fraud very seriously and you can be prosecuted even if it was a simple error that went uncorrected.

At this point, the Chapter 7 bankruptcy lawyer will file the petition in local bankruptcy court, which will appoint a bankruptcy trustee to your case.

In most cases, the court will also grant you an Automatic Stay, which means that creditors are temporarily prevented from taking further action against you outside of bankruptcy court.

Filing Chapter 7 Bankruptcy Steps

• Back to Step 1
• Back to Step 2
• Step 4
• Step 5

This briefing includes a section on financial management and how to create a personal budget and will also discuss alternatives to Chapter 7 bankruptcy.

Although there are some hardship exceptions to this rule, most debtors are required to show the bankruptcy court proof of completion of the credit counseling briefing.

Failing to do so before filing may result in your case being dismissed.

A Chapter 7 bankruptcy lawyer may refer you to the appropriate agency or you can purchase an approved Credit Counseling Briefing online at www.StartFreshToday.com.

Filing Chapter 7 Bankruptcy Steps

• Back to Step 1
• Step 3
• Step 4
• Step 5

The above summary is not legal advice. Laws may have changed since our last update. For the latest information on Chapter 7 bankruptcy laws, speak to a local Chapter 7 bankruptcy lawyer in your state.

Qualification for Chapter 7 bankruptcy is the first step to filing this type of bankruptcy.
In order to figure out if you qualify to file Chapter 7 bankruptcy, you must go through the steps of the Chapter 7 means test.

The truth is that more than 96 percent of potential Chapter 7 petitioners do qualify–and in the event that you’re one of those few who don’t, you may still be able to file bankruptcy under Chapter 13 bankruptcy.

What is the Chapter 7 Means Test?

The Chapter 7 means test is a two-step process.

You start with a state median income comparison, which compares your monthly income to the median income of a family that is the same size as yours in your state.

If your monthly income is at or below the median income, you qualify for Chapter 7 bankruptcy.

If your income is higher than the median income it doesn’t mean that you can’t file for Chapter 7 bankruptcy, but you have to complete the second step of the Chapter 7 bankruptcy means test.

The second step of the Chapter 7 means test involves calculating disposable income and unsecured debts.

According to the test, if your disposable income over the next five years is less than $6,000 ($100/month), you likely “pass” the Chapter 7 bankruptcy means test and qualify to file Chapter 7 bankruptcy.

A local bankruptcy attorney can help you understand which part of your income is disposable for the calculation.

If your disposable income during that five year period is greater than $6,000 but less than $10,000, you may still be able to file for Chapter 7, depending upon your allowed expenses. Talk to a Chapter 7 bankruptcy attorney about your options today.

Filing Chapter 7 Bankruptcy Steps

• Step 2
  
• Step 3
• Step 4
• Step 5
  

The above summary is not legal advice ~ Laws may have changed since our last update. For the latest information on bankruptcy laws, speak to a local Chapter 7 bankruptcy lawyer in your state.

In most bankruptcy cases, you can protect your car using allowable bankruptcy code exemptions.

While Chapter 7 bankruptcy is mainly designed to address debt related to credit cards and medical bills, Chapter 7 exemptions outline specific protections for things like cars, home furnishings and family keepsakes.

Exemption allows you to file for Chapter 7 bankruptcy relief while protecting important property, like your car.

The bankruptcy courts are here to protect and offer relief to those in need, and they understand that you will need a car to get to work, regardless of your credit card debt.

Car Loans in Bankruptcy

It is important to clarify whether you have a clear title to your car.

If you have pledged your car as security for a debt, or if you are currently leasing or financing a vehicle, you will probably have a few choices for secured loans after your Chapter 7 bankruptcy filing:

Reaffirm

A reaffirmation agreement constitutes a contract between you and your car creditor. You will agree to pay the balance owed on your car note, despite your bankruptcy filing.

Under this plan, you will continue to make your payments and the creditor agrees not to repossess your car.

Reaffirmed debts will not be discharged in bankruptcy.

If you do not make your payments, the car lender is able to repossess the car and sue you for the deficiency balance.

Reaffirmation agreements are voluntary, but as you can see, it is a decision with serious repercussions.

Redeem

In Chapter 7 bankruptcy, you are entitled to purchase or redeem your car from your creditor by making a one-time payment equal to the car’s fair market value.

The U.S. Bankruptcy Code provides that you are required to pay your creditor the replacement retail cost of the car, and the balance of the debt will be discharged.

For example, consider a car worth $5000, in a situation where the owner owes the finance company $10,000. In this case, you can redeem the vehicle by paying the creditor $5,000.

The remaining amount will be discharged by your bankruptcy.

Surrender

If you cannot possibly afford the monthly payments on your car loan or if you determine that you owe more than the car is worth, you are able to get rid of the car and related dept as part of your Chapter 7 bankruptcy discharge. You will be required to surrender such a vehicle to the creditor.

If you are leasing a car, in Chapter 7 bankruptcy, you can opt to either continue making monthly payments or surrender the car back. If you surrender the vehicle, any obligation under the lease will be eliminated by the bankruptcy.

Because many states have different bankruptcy code exemptions, they allow the debtor to choose whether to take the federal slate of exemptions or the state ones.

As these laws vary from state to state, understanding what your choices are can be difficult. A bankruptcy lawyer can explain what applies to your specific case.

In Chapter 7 bankruptcy cases, “discharge” can be referred to:

• The discharge (forgiveness) of debts like credit card and medical bills
• The discharge (exit) from bankruptcy protection

To find out what a Chapter 7 discharge could mean for you, fill out the below form to be connected with a bankruptcy lawyer.

Be sure to also check out the following information about the discharge of debts through Chapter 7 bankruptcy.

The Chapter 7 Discharge of Debts

Those who file under Chapter 7 of the U.S. Bankruptcy Code are eligible to receive a discharge of debts. Here, the discharge refers to the permanent retirement of certain types of debt.

This means that the court forgives these debts and you are no longer obligated to pay them — ever.

The types of debt that may be eliminated – or discharged – by filing Chapter 7 bankruptcy include:

• Credit Card Bills
• Medical Bills
• Payday Loans
• Personal Loans
• Some Signature Loans
• Utility Bills
• Back Rent

These debts are considered unsecured debt, and Chapter 7 bankruptcy is designed to address these with force.

However, it’s important to keep in mind that some types of debt can’t be excused by the court during a Chapter 7 case, which includes:

• Tax Debt: In most cases, filers must pay debts owed on taxes. Ask a Chapter 7 bankruptcy lawyer about the exceptions to this rule.
• Student Loans: Unless you can prove that paying your student loans would cause you “undue hardship”, they can’t be discharged in Chapter 7 bankruptcy.
• Child Support & Alimony: Money owed to an ex-spouse for support is non-dischargeable.
• Marital Debts: Debts you undertake in the course of a divorce or separation are not eligible for the Chapter 7 discharge.
• Criminal/Legal Fines & Penalties: Any amount you owe as a criminal or legal obligation is non-dischargeable in bankruptcy court.
• Certain Luxury Consumer Debt: The purchase of any luxury item costing more than $500 made within 90 days of your bankruptcy filing, as well as any cash advance totaling more than $750 taken on within 70 days of your bankruptcy filing, can’t be discharged.
• Fraud/Intentional Torts: Any debt you took on under false pretenses is non-dischargeable. However, if you were the victim of lender’s fraud, you should ask a bankruptcy attorney to help you petition the court to allow the debt to be discharged.

If you have significant debt that cannot be addressed by Chapter 7, then you may need to speak with a lawyer about Chapter 13 bankruptcy, which can address different types of debt.

Chapter 7 Discharge: The Exit from Bankruptcy

The other type of Chapter 7 discharge is the completion of the bankruptcy process and the exit from bankruptcy protection.

If you go by the books and refrain from concealing assets or taking on major debt at the last minute, you should be able to receive your discharge within 6 months of filing Chapter 7 bankruptcy.

In fact, some filers find that it only takes them a few months to receive a discharge of their debts.

Your discharge is your key to a fresh start. Once your Chapter 7 bankruptcy discharge takes effect, you’re ready to start your new financial life.

In order to receive your discharge in a timely manner, it’s important to follow the advice of your Chapter 7 bankruptcy lawyer.

For a more detailed look at what you’ll need to do, take a look at the Chapter 7 timeline, which outlines the weekly requirements in a Chapter 7 case. Or, you can always speak with a local Chapter 7 bankruptcy attorney for more details.

Filing Chapter 7 Bankruptcy Steps

• Back to Step 1
• Back to Step 2
• Back to Step 3
• Back to Step 4

A bankruptcy lawyer can break down the jargon and help you understand the bankruptcy process. We can connect you with a local bankruptcy attorney–simply fill out the below form to be connected today:

Be sure to also take a look at this summary of key laws that may affect your Chapter 7 case.

Understanding Chapter 7 Bankruptcy Laws

Before Filing Chapter 7 Bankruptcy

• The Chapter 7 Means Test: The means test is a qualifying test that you must “pass” in order to receive protection under Chapter 7 of the U.S. Bankruptcy Code. The test requires you to compare your income to the median income of a family your size in your state. If your income is lower than the median, you “pass” and can file under Chapter 7. If not, you may still qualify – you just have to perform further calculations under the means test.
  • Review state median income tables.
• Credit Counseling Briefing: If you want the bankruptcy court to accept your petition, you must receive a credit counseling briefing from an accredited budget and credit counseling service before filing. Chapter 7 bankruptcy law requires this briefing to make sure you, the petitioner, know all your options for getting out of debt. Want to learn more?
  • Check out this accredited counseling service.

After Filing Chapter 7 Bankruptcy

• Chapter 7 Exemptions: These exemptions serve to protect your possessions from creditors. Part of the bankruptcy code, exemptions are a guide to the types and amounts of property that are protected by sale when you file Chapter 7. Because of exemptions, there is no property sale of any kind in most CHapter 7 cases. Exemptions vary by state, but generally include a home, work tools, clothes, etc.
• Debtor Education Course: Before you’re eligible for your Chapter 7 discharge, you must complete a debtor education course. Like the credit counseling briefing, this is part of Chapter 7 bankruptcy law that was introduced by BAPCPA. The course is designed to help you develop skills for budgeting, managing money and making the most of your fresh start.
  • Check out this accredited debt education course.

More Information on Chapter 7 Bankruptcy Laws:

• Chapter 7 bankruptcy bankruptcy laws in each state, including a list of the property exemption.
• How Chapter 7 bankruptcy exemptions work to protect your property.
• Chapter 7 bankruptcy forms you need to successfully file and complete your case.

Get Answers With A Local Chapter 7 Bankruptcy Attorney

This is only a brief look at the laws that could affect your bankruptcy case. Keep in mind that all laws are complex, and the bankruptcy code varies from state to state.

To fully understand how your local laws could affect you, speak with a local Chapter 7 bankruptcy attorney. Your attorney can take you through bankruptcy process, answer your questions and help you take advantage of all the protection and debt relief offered by the law.

To speak with a bankruptcy attorney in your state, simply complete the free form on this page and connect you right away, at no charge.

While Chapter 7 cases tend to move quickly, with most petitioners getting a discharge within six months, actually filing your Chapter 7 bankruptcy papers is not the first step you’ll have to think about. So take a few moments to review this timeline and figure out what’s ahead if you do choose to file for Chapter 7 bankruptcy.

Before Filing a Chapter 7 Bankruptcy Petition

• 8 Years Before: A minimum of eight years must pass between petitions under Chapter 7 of the U.S. Bankruptcy Code. You may be eligible to file Chapter 7 just six years after a Chapter 12 or 13 discharge, depending on your repayments.
• 1 Year Before: Any attempts at hiding or destroying assets in an attempt to
  protect them from creditors, as well as any payment in full to a creditor (such as a family member or friend) within one year of filing Chapter 7, will make you ineligible for this type of bankruptcy protection. Any property/assets you tried to get rid of could be collected and used to repay your creditors.
• 180 Days Before: In this time period, you must receive a Credit Counseling Briefing from an accredited nonprofit budget and credit counseling agency. This is one of the requirements introduced by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.
• 90 Days Before: You must live in the state where you want to file for at least 90 days to gain eligibility. Further, repayment of debts to family members or friends is considered “unlawful preference,” and is not permitted. Certain debt incurred in this period (e.g. for acquiring luxury goods) is considered non-dischargeable by the bankruptcy court.

Your Case Is Filed!

When your bankruptcy lawyer files your paperwork with the court, your Chapter 7 case officially begins. You can expect the following three things to happen at the time your case is filed:

1. The automatic stay goes into effect, halting all collection actions against you. This means that you’re protected from repossession, garnishment, foreclosure and lawsuits.
2. Everyone you owe money to (your creditors) receives notice that you’ve filed Chapter 7 bankruptcy.
3. A bankruptcy trustee is assigned to your case. Your trustee, who works for the federal government, is responsible for reviewing your petition and scheduling the meeting of your creditors.

Your Chapter 7 Case: the Next Six Months

After filing your Chapter 7 petition, your case should move pretty quickly, but you’ll still have many steps to complete before you can get your discharge.

• 15 Days after Filing: Within this time, you’ll have to file schedules detailing your debts, assets, expenses, income and statement of affairs. Also within this time, the court will mail a Notice of Commencement of Case to all your creditors. The Notice will include the date for the Meeting of the Creditors and the deadline for creditors to object to any debts listed in your case.
• 30 Days after Filing: Within this time, you’ll have to file your Statement of Intention, which details how you intend to handle collateral you have for loans. In other words, you’ll have to report whether you plan to reaffirm secured debts (like that for your car), redeem your property or surrender it. You must serve a copy of this Statement on your trustee and all creditors. You then have 45 days to take the actions outlined in the Statement.
• 6 Weeks (42 Days) after Filing: The Meeting of the Creditors takes place. You’ll need to get a copy of your most recent tax return to your trustee and any creditor who requests it a week before the meeting. You’re required to attend the meeting and testify to the truth of the statements in your Chapter 7 petition. Usually, these meetings are quick and informal affairs.
• 45 Days after Filing: Within this time, you need to file a statement with a certificate from your lawyer verifying that you were told about the bankruptcy chapters available to you. You’ll also need to file a statement of any income from your employer within 60 days of your filing, an itemized receipt of your monthly income and an estimate of any increases in income/expenditures you expect in the next 12 months.
• 30 Days after the Meeting of the Creditors: During this time, your trustee can object to any exemptions you claim in your petition. Similarly, your creditors can object to any debts you listed.
• 60 Days after the Meeting of the Creditors: During this time, your creditors can object to the discharge of any debts listed in your petition and schedules. Generally, you can expect objections if you engaged in questionable or illegal activity at some point in relation to the debt.
• 90 Days after the Meeting of the Creditors: Creditors (except government entities) have this time to furnish evidence to support their objections to discharges.
• 180 Days after the Meeting of the Creditors: Government creditors must submit their evidence within this time.

File Chapter 7 Bankruptcy with Help from a Bankruptcy Lawyer!

If you’re overwhelmed by all these dates and requirements, don’t worry. A bankruptcy attorney practicing in your area can help you make sense of the bankruptcy process. To contact a local bankruptcy lawyer today, just fill out our free online case evaluation form.

The above summary is not legal advice. Laws may have changed since our last update. For the latest information on bankruptcy laws, speak to a local bankruptcy lawyer in your state.

For even more information about Chapter 7 bankruptcy, talk with a bankruptcy lawyer. Call 877-226-6844 or fill out our free bankruptcy case evaluation form, and we’ll connect you with a bankruptcy attorney in your area right away.

Chapter 7 Bankruptcy Glossary

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Abusive Overdraft Loan: short-term, high-interest loans of small dollar amounts made by banks to customers who overdraw their accounts.

For many banks, abusive overdraft loans are the norm; some banks offer this “service” automatically.

Adjustable Rate Mortgage (ARM): a home loan whose monthly payment fluctuates, or “adjusts” each month. Often contrasted with the fixed rate mortgage, whose payments are constant each month.

ARMs became popular during the real estate boom of a few years ago. Because of the “innovative” terms of some adjustable mortgages, many Americans are now facing foreclosure.

Asset: any property of value owned by a person or entity.

During Chapter 7 bankruptcy cases, the bankruptcy trustee may liquidate (convert to cash) a filer’s non-exempt assets and repay creditors with the money.

Automatic Stay: a protection offered to bankruptcy petitioners. As soon as a bankruptcy case is filed, the automatic stay protects filers from most collection actions, including lawsuits, repossession, debt collection, garnishment and foreclosure.

Bankruptcy: the legal announcement that an individual or organization is unable to repay creditors. The U.S. Bankruptcy Code offers several versions of bankruptcy, so that people and entities with various financial struggles may all have access to a fresh financial start.

If Chapter 7 bankruptcy turns out to be inappropriate for your financial situation, you may be able to find relief with Chapter 13 bankruptcy.

Bankruptcy Petition: the paperwork required to file with the bankruptcy court in order to officially begin a bankruptcy case.

Those who file for Chapter 7 bankruptcy and those who file for Chapter 13 bankruptcy will experience different events after the filing of the initial bankruptcy petition.

Bankruptcy Trustee: the person, appointed by the creditors in a bankruptcy case or by the United States Justice Department, who oversees the happenings of a bankruptcy case.

One of the trustee’s roles in Chapter 7 bankruptcy cases is to gather, liquidate and distribute non-exempt property.

BAPCPA (Bankruptcy Abuse Prevention and Consumer Protection Act of 2005): the revision of U.S. bankruptcy law passed in October, 2005. For Chapter 7 petitioners, BAPCPA introduced a qualifying “means test.”

BAPCPA mandates that all bankruptcy filers complete Credit Counseling and Debtor Education classes before receiving a bankruptcy discharge.

Chapter 7 Bankruptcy:sometimes called “liquidation,” this type of personal bankruptcy discharges, or excuses, filers from many unsecured debts.

Chapter 7 bankruptcy is sometimes called “liquidation” because a bankruptcy trustee can liquidate, or convert to cash, a filer’s non-exempt assets, to pay creditors.

Chapter 13 Bankruptcy: sometimes called “reorganization,” this type of personal bankruptcy allows petitioners to work within a three- to five-year repayment plan to get current on their obligations to creditors.

Chapter 13 filers are often able to keep their cars or homes and have a chance to catch up on debts.

Collateral: an asset offered as security for a loan.

A house is the collateral in a mortgage loan: if the borrower doesn’t adhere to the terms of the loan, the lender can seize the house. The borrower’s incentive to keep making payments is continuing to live in the house.

Cosigner: a person who literally signs loan papers along with the primary borrower. If the primary borrower defaults on a loan, the co-signer is legally responsible for making necessary payments.

Those rebuilding credit after a bankruptcy may qualify for more favorable loan terms by working with a cosigner who has a solid credit history.

Credit Counseling Briefing: the “ticket in” to the bankruptcy process, this must be completed before a court will accept a bankruptcy petition. You can complete a credit counseling briefing in person, over the phone or on the Internet.

Cases filed without proof that the petitioner has completed the credit counseling requirement may be thrown out by a judge.

Credit Report: documentation of your credit history, including payment history on various credit sources (mortgages, rent, car loans, credit cards, etc.), current status of accounts and more.

Thanks to the Fair Credit Reporting Act of 2003, all Americans are entitled to one free credit report per year from each of the three major credit reporting agencies (Experian, TransUnion and Equifax).

Credit Reporting Agency (Credit Bureau): a company that offers credit reports. These agencies collect, document and report credit information for Americans.

To receive your free credit report from a Credit Reporting Agency, visit www.annualcreditreport.com.

Credit Score: a number from 300 – 850 that helps lenders to gauge an individual’s risk level. Higher credit scores translate to greater likelihood of repaying a loan, basically.

Credit scores below a certain point are considered “subprime,” and are viewed as high lending risks. Higher scores are considered “prime,” and usually qualify borrowers for more attractive loan terms.

Creditor:a person or entity to whom a debtor owes money.

Chapter 7 bankruptcy is designed to satisfy your obligations to creditors tied to unsecure debts. During the repayment portion of Chapter 13 bankruptcy cases, petitioners pay off most of their obligations to creditors during a court-approved repayment timetable.

Debtor: someone who owes money to a creditor.

For some debtors, bankruptcy is the only viable option for eliminating their debt.

Debtor Education Course: the “ticket out” of bankruptcy. The debtor education course is a requirement for all bankruptcy petitioners who wish to receive a discharge from the bankruptcy court.

The practical skills taught in the debtor education course are meant to be useful to petitioners in their post-bankruptcy life. Concepts covered include money handling, debt management and more.

Default: failure to meet financial obligations. Also, the state of a loan that hasn’t been paid: after missing a given number of loan payments, you will default on your loan and your loan will be in default.

A lender can begin collection actions (foreclosure, garnishment, repossession, etc.) on a loan that goes into default.

Discharge: 1. The elimination of debt. In Chapter 7 cases, a bankruptcy judge can discharge, or excuse, some or all of your unsecured debts.

2. Departure from bankruptcy. After completing the requirements of the bankruptcy court, you can receive your bankruptcy discharge. Once you receive your bankruptcy discharge, all debts handled in your case will be considered closed.

Dischargeable:

A debt that may be forgiven during your bankruptcy case. A debtor is no longer obligated to pay dischargeable debts that are forgiven by the bankruptcy court.

Equity: the value of an asset aside from anything owed on it (liens, mortgages, etc.).

After making mortgage payments for several years, many homeowners have equity in their houses. An asset has equity if you could sell it for more than it would cost you to pay off any debts you owe on it.

Exemptions:

Chapter 7 exemptions are designed to protect certain types and amounts of property from sale when you file Chapter 7 bankruptcy. Exemptions vary from state to state, but generally include a home, work tools and some personal property, like household furnishings and clothes.

These bankruptcy exemptions are the reason why there is no sale of any property in most Chapter 7 bankruptcy cases. Most people eligible to file do not own any non-exempt property.

FICO Score: the credit score, as calculated by the Fair Isaac Corporation. This is the score lenders use most commonly when determining a borrower’s risk level.

Your FICO score is between 300 and 850. Having a higher score will probably qualify you for attractive loan terms, while having a lower score may impede you from getting loans.

Fixed Rate Mortgage: a home loan that requires borrowers to pay a constant (“fixed”) rate throughout the life of a loan (usually about 30 years). Contrast with “adjustable rate mortgage.”

Current turmoil in the housing market has been partly attributed by lenders offering too few fixed rate mortgages and too many irresponsible adjustable rate mortgages, which led to massive borrower defaults.

Foreclosure (Mortgage Foreclosure):the repossession of a home by a mortgage lender. If a borrower deviates from the terms of the mortgage agreement by failing to make payments, a lender can foreclose on a property.

After a roaring boom period, the U.S. housing market has plunged into a slump characterized by massive mortgage defaults and foreclosures.

Garnishment: a type of collection that allows debt collectors to pay a debtor’s wages directly to a creditor.

Chapter 7 bankruptcy automatic stay is designed to halt all collection efforts – including garnishment – as soon as the petition is filed, in most cases.

Identity Theft: the information crime of using another person’s identification information (including SSN, credit card numbers, etc.) to complete financial transactions fraudulently.

Regular checks of your credit report allow you to verify the status of your identity and personal information.

Insolvency: see “bankruptcy.”

Lien: a claim on a piece of property as an exchange for a debt.

Car loans and house mortgages are both examples of voluntary liens: the borrower agrees that he will surrender his property if he fails to make payments. An involuntary lien results from a judge’s ruling that a debtor must surrender property to a creditor (e.g. in a lawsuit).

Liquidation: the conversion of an asset to cash (usually by selling it).

During a Chapter 7 bankruptcy case, a trustee can liquidate any non-exempt assets a filer has and use the money to pay creditors. If you don’t have any non-exempt assets, as is the case with many Chapter 7 filers, little or no liquidation will occur.

Mass Layoffs: a large-scale letting go of employees from a single company or organization.

Mass layoffs usually result from financial reorganization or difficulty.

Means Test: Everyone interested in filing for Chapter 7 bankruptcy has had to pass a test of means (financial ability).

The means test requires you to compare your income with that of other families of your size in your area. Learn more.

Medical Bankruptcy: financial hardship from medical expenses that leads you to file for bankruptcy.

Research has shown that as many as half of all bankruptcies in the U.S. can be attributed at least in part to medical expenses, making them the second most common causal factor of bankruptcy filings.

Medical debt is considered unsecured debt and may be addressed in a Chapter 7 bankruptcy filing.

Mortgage: a loan (or promise to pay) secured by real estate. You risk losing your real estate (usually a home) if you don’t follow the terms of the loan.

Mortgage loans are common for homebuyers, since few people can afford to pay cash for a house.

Non-Dischargeable: unable to be excused by a court of law.

Student loans, tax debts and child support debts are some examples of loans that are generally considered non-dischargeable in bankruptcy court.

Payday Loan: short-term, high-interest loans for relatively small dollar amounts marketed to those who are unable to get loans from mainstream lenders like banks.

Payday loans can lead to a ruinous debt cycle and can carry annual interest rates up to 390 percent. Many states have begun to take legislative action against payday lending stores.

Debt related to payday loans is considered unsecured debt and may be included in a Chapter 7 bankruptcy filing.

Predatory Lending: while no legal definition for predatory lending exists, the term has been used to describe lending practices that involve deceit. Examples include lying about the terms of a loan, talking a borrower into less favorable terms than he qualifies for, etc.

Legislators have named subprime mortgages, abuse overdraft loans, some credit cards and payday loans as examples of predatory loans.

Repossession: when a creditor reclaims ownership of property because a borrower fails to make payments.

Foreclosure is the repossession of a house; like all collection actions, repossession may be halted by bankruptcy’s automatic stay.

Schedules: the papers filed with the bankruptcy court that contain the details of a filer’s debts, assets and income.

After filing your bankruptcy petition, your lawyer will file schedules and other appropriate documents.

Secured Debt: a debt secured by material goods or collateral.

Car loans are secured debt backed by an automobile. Lenders can reduce risk by securitizing loans – a borrower who doesn’t adhere to the terms of a loan stands to lose the collateral, and so has greater incentive to pay.

Learn more about Chapter 7 bankruptcy and your car.

Subprime Loan: a loan offered to someone whose credit score is low or credit history is shaky. Subprime loans come with more expensive terms (e.g. higher interest rates) than prime loans, since they present a bigger risk for the lender.

Subprime loans can serve to get real estate to low-income Americans, but they were largely abused during the housing boom, and are now proving disastrous investments for many.

Unsecured Debt: a debt not secured by material goods (collateral).

Most credit card debt is unsecured – creditors cannot reclaim any property for those who do not pay. Creditors may sue to reclaim unpaid unsecured debt.

United States Bankruptcy Code: the collection of laws and regulations that determine the workings of bankruptcy courts in the U.S.

Click here to view the full U.S. Bankruptcy Code. Learn more about Chapter 7 bankruptcy laws.