Sacramento Law Group

Chapter 7 Bankruptcy

Chapter 7 bankruptcy is the most common form of bankruptcy. It’s the type of bankruptcy that most people think about when they think of bankruptcy. Chapter 7 bankruptcy is essentially a liquidation of non-exempt assets followed by a discharge of debts. However, there are many misconceptions surrounding Chapter 7 bankruptcy. This overview of Chapter 7 bankruptcy will address many of those misconceptions and help you make a more informed decision about bankruptcy.

Who Can File For Bankruptcy?

  • If you live in the U.S., you can file for bankruptcy.
  • If you own property in the U.S., you can file for bankruptcy.
  • If you own a business in the U.S, you can file for bankruptcy.


    • Do I have to be insolvent to file for bankruptcy?

    No. Chapter 7 bankruptcy does not require that you be insolvent. Insolvent means that your debts exceed your assets.

    What is “exempt” property?

    Before we define “exempt” property, let’s understand what an “exemption” is. California law gives individuals filing for bankruptcy the choice to use one of two exemption schemes. The first scheme is California’s regular exemptions that are codified as part of the Enforcement of Judgments Law (ELJ) that applies to the enforcement of civil judgments in California. That means that the first exemption scheme is not specific to bankruptcy; it applies to both bankruptcy and the enforcement of civil judgments. The second exemption scheme can only be used in bankruptcy. Both exemption schemes allow debtors to “exempt” certain property, but the amounts and type of property differ. A Sacramento Law Group bankruptcy lawyer will tell you which exemption scheme is right for you. Our goal is to maximize your exempt property to mitigate liquidation.

    When you “exempt” property you are removing your interest in that property from the reach of the bankruptcy estate and prepetition creditors. You exempt property by claiming it as exempt on Schedule C in accordance with the exemption scheme that you select. In other words, your Schedule C will describe each asset and the corresponding statutory provision under which the exemption claim is made.

    Now for the answer: exempt property is property that you can claim as exempt on Schedule C of your bankruptcy petition pursuant to the exemption scheme that you select. The legal effect of “exempt” property is that it is removed from the bankruptcy estate and is beyond the reach of prepetition creditors.

    Can my exempt property be sold?

    If the property is entirely exempt, it cannot be sold in Chapter 7 bankruptcy. If only a portion of the property can be claimed as exempt, it can be sold in Chapter 7 bankruptcy but you will get the exempt cash value upon its sale. For example, if you claim jewelry as 100% exempt (the fair market value of the jewelry is below the maximum exemption amount) you will be able to retain the property. However, if you only claim a portion of the jewelry as exempt it can be sold by the trustee, but you will receive the exempt value upon its sale.

    Will I be grilled at the meeting of creditors?

    Not usually. A lot of clients think that they will be grilled at the meeting of creditors. They think that they’ll be asked questions like “isn’t it immoral to file for bankruptcy” or other nonsense. The truth is that most meeting of creditors (otherwise known as 341(a) meetings because that’s the statutory section that requires the meeting) are routine. The trustee will ask you some routine questions about your assets and liabilities. One of the first questions will be about whether you are aware of the potential consequences of bankruptcy on your credit history. If the idea was that this question would dissuade you from filing for bankruptcy it’s too late. You’ve already filed. Other than the fact that bankruptcy will stay on your credit report for 8-10 years there’s nothing else that the trustee can say about this.

    If you have fraudulently concealed assets or performed some other act that would make a debt nondischargeable you may be asked about these acts. Creditors seeking to object to your discharge may investigate your actions during the meeting of creditors. However, you should not worry too much about the meeting of creditors. When you hire Sacramento Law Group you will be represented at the meeting of creditors.

    What will I have to do in chapter 7 bankruptcy?

    When you file for chapter 7 bankruptcy the bankruptcy code and federal rules of bankruptcy procedure will impose several duties upon you. Many of these duties are found in 11 U.S.C. § 521. Generally, if you file for chapter 7 bankruptcy you will be required to do the following:

  • File several documents with the bankruptcy court. (To see what documents must be submitted with a voluntary chapter 7 bankruptcy petition in the Eastern District of California, review EDC 2-035). These documents include the voluntary petition; schedules; statement of financial affairs; statement of current monthly income; statement of intention; statement of social security number; credit counseling certificate; disclosure of bankruptcy lawyer compensation; and pay stubs. Failure to file required documents can result in dismissal of the chapter 7 bankruptcy.
  • Cooperate with the chapter 7 bankruptcy trustee. You must turnover property of the estate and records that relate to property of the estate.
  • Appear at the discharge hearing if it is held by the bankruptcy court.
  • Submit to questioning at the meeting of creditors.
  • Attend the hearing on a complaint objecting to your discharge and testify at the hearing if you are called as a witness.


    • We are a debt relief agency. We help people file for bankruptcy relief under the U.S. Bankruptcy Code. The information contained in this website is for informational purposes only and is not legal advice. An attorney-client relationship can only be established by signing a representation agreement.
    *$900 Chapter 7 Bankruptcy Fee Disclaimer: While most cases qualify for the above fee, some cases are complex. Consequently, the above fee is only a sample fee (not a specific or guaranteed fee) and is subject to change at any time due to the necessity of charging more for complex cases. The sample chapter 7 fee represents the typical fee for a simple no-asset chapter 7 case. The $900 fee is only available to residents of the following counties: Sacramento, Placer, Yolo, Solano and San Joaquin. Residents of other counties may be charged more.