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David C. Hoskins, Attorney at Law


In this series of articles, Mr. Hoskins explains chapter 7 bankruptcy: What is Chapter 7? How much will I pay for a chapter 7? What is disposable income? What happens to my property in chapter 7?

What is Chapter 7?

Posted by DaveHoskins on December 5, 2012


Chapter 7 Video

Chapter 7 bankruptcy is a liquidation bankruptcy, sometimes referred to as “straight bankruptcy.” In chapter 7 bankruptcy, a trustee will take non-exempt property (unprotected by an exemption), sell it, and use the proceeds to pay your creditors.

Non-exempt property is property that is not protected from the trustee. Most of what you own is protected. For example, in Colorado you have at least $7,500 of protection for a personal automobile.  If your car is worth $10,000 and has an unpaid loan balance of $5,000, your $2,500 of equity is protected (exempt) from the Trustee.

You give up non-exempt property, if any, and then you get a discharge of your debt. All debt is discharged in chapter 7 bankruptcy, except certain debt, such as most tax debt, student loan debt, debt arising from divorce, and debt arising from crime. Your personal liability to a secured creditor (such as home mortgage lenders and car lenders) will be discharged in a chapter 7 bankruptcy, but the lender's lien (that is the mortgage lender's right to foreclose or the car lender's right to repossess the vehicle) will not be affected.  For example, if you later default in payments on your home, the lender will be able to foreclose on and sell your home, but will not be able to sue you for the unpaid balance.

Chapter 7 bankruptcy can be used by people who owe any amount of debt. Subject to certain limitations, in chapter 7 one may keep a home, up to two cars, retirement plans, tools of the trade, and most of what ordinary people need to live. Usually, one may not keep luxury items such as recreational toys and second homes. These are just a few examples of what one may keep and not keep in chapter 7 bankruptcy.

If done properly and under the right circumstances, chapter 7 is the easiest and quickest way to get a discharge of your debts.




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Email me. I'm an experienced bankruptcy attorney. Do you have bankruptcy questions? Go ahead, ask! I’m here to offer bankruptcy HELPHelping to Educate you on bankruptcy Laws, and the Practical solutions to getting a fresh start.

The statements of law made here are general statements of law, effective at the time published and subject to change from time to time. These statements are not intended, nor may they be construed, to be applicable to any particular set of factual circumstances nor to any particular person. I recommend that all readers seek the assistance and advice of an experienced bankruptcy lawyer for guidance in their particular circumstances.

© Copyright 2013 David C. Hoskins, licensed Colorado lawyer