Chapter 7 is designed for debtors in financial difficulty who do not have the ability to pay their existing debts.
Debtors whose debts are primarily consumer debts are subject to a “means test” designed to determine whether the case should be permitted to proceed under chapter 7. The means test is based on family size, place of residence, and income over the 6 months prior to filing bankruptcy.
Under chapter 7, you may claim certain items of your property as exempt. A trustee may have the right to take possession of and sell the remaining property that is not exempt and use the sale proceeds to pay your creditors.
The purpose of filing a chapter 7 case is to obtain a discharge of your existing debts.
Even if you receive a general discharge, some particular debts are not discharged under the law. Therefore, you may still be responsible for:
- Most taxes and student loans
- Debts incurred to pay non-dischargeable taxes
- Domestic support obligations
- Most fines, penalties, forfeitures, and criminal restitution obligations
- Certain debts which are not properly listed in your bankruptcy papers
- Debts for death or personal injury caused by operating a motor vehicle, vessel, or aircraft while under the influence of alcohol or drugs.
Also, if a creditor can prove that a debt arose from fraud, breach of fiduciary duty, theft, or from a willful and malicious injury, the bankruptcy court may determine that the debt will not be not discharged.
