“It gives to the honest but
unfortunate debtor…a new
opportunity in life and a clear
field for the future effort,
unhampered by the pressure
and discouragement of
—The U.S. Supreme Court
in explaining the purpose of bankruptcy
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. If your income is greater than the median income for your state of residence and family size, in some cases creditors have the right to file a motion requesting that the court dismiss your case under 707(b) of the U.S. Bankruptcy Code. It is up to the court to decide whether the case should be dismissed.
Under Chapter 7, you may claim certain aspects of your property as exempt under governing law. 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. However, if you are found to have committed certain kinds of improper conduct described in the Bankruptcy Code, the court may deny your discharge. If denied, the purpose for which you filed the bankruptcy petition will be defeated.
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 and property settlement obligations; most fines, penalties, forfeitures, and criminal restitution obligations;