Chapter 7 Bankruptcy: A Fresh Start with Castellan Law Group, APC
- frankclinesq
- Jul 28
- 3 min read
Updated: Aug 4
At Castellan Law Group, APC, we understand that financial hardship can happen to anyone. Whether it’s due to unexpected medical bills, job loss, or mounting credit card debt, the pressure of overwhelming finances can feel like there’s no way out.
If you're facing serious debt and looking for a way to reset, Chapter 7 bankruptcy may offer the fresh start you need. Our experienced bankruptcy attorneys are here to guide you through the process with compassion, clarity, and a strong legal strategy tailored to your unique situation.
In this blog, we’ll walk you through what Chapter 7 bankruptcy is, how it works, and what you need to consider before filing.
What Is Chapter 7 Bankruptcy?
Chapter 7 bankruptcy—also known as “liquidation” bankruptcy" is a legal process that allows individuals (and some businesses) to eliminate most unsecured debts, such as:
Credit card balances
Medical bills
Personal loans
Utility bills
Some back rent
In exchange, a court-appointed trustee may sell some of your non-exempt assets to pay creditors. However, most people who file under Chapter 7 don’t lose everything, federal and state exemption laws protect certain property like your primary home (up to a certain value), car, clothing, and basic household goods.
Who Qualifies for Chapter 7?
To qualify for Chapter 7, you must pass a means test, which compares your income to the median income for a household of your size in your state. If your income is below the median, or you don’t have enough disposable income to repay debts, you’re likely eligible.
You also can’t have filed a Chapter 7 bankruptcy in the past 8 years (or Chapter 13 in the past 6 years) and must complete credit counseling from an approved agency before filing.
The Chapter 7 Process: Step by Step
Here’s what the typical Chapter 7 timeline looks like:
Credit Counseling – Required before you file.
File Petition – Includes details about your income, assets, debts, and recent financial history.
Automatic Stay Begins – Creditors must stop collection efforts, wage garnishments, and lawsuits.
Trustee Appointed – They review your case and may sell non-exempt assets.
Meeting of Creditors (341 Meeting) – You answer questions under oath about your finances.
Debts Discharged – Usually within 3-6 months, eligible debts are wiped out permanently.
What Debts Are Not Discharged?
While Chapter 7 can clear many debts, some are not dischargeable, such as:
Student loans (except in rare hardship cases)
Child support and alimony
Recent tax debts
Court fines and criminal restitution
Debts from fraud or malicious acts
Pros and Cons of Chapter 7 Bankruptcy
Pros:
Fast debt relief (typically within 6 months)
Most unsecured debts discharged
Stops lawsuits, wage garnishments, and collections
You keep exempt property
Cons:
Credit score impact
Potential loss of non-exempt property
Doesn’t eliminate all types of debt
Can affect ability to get loans or housing in the short term
Is Chapter 7 Right for You?
Chapter 7 isn’t the right choice for everyone. It’s best for those with low income, few assets, and overwhelming unsecured debts. If you have valuable property you want to protect or need to catch up on a mortgage, Chapter 13 may be a better fit.
Talking to a bankruptcy attorney can help you understand your options and whether Chapter 7 is the right path. Castellan Law Group, APC offers free bankruptcy consultations.
Castellan Law Group, APC
1100 W La Habra Blvd.
La Habra, CA 90631
Tel: (626) 662-0286