Chapter 7

Chapter 7 bankruptcy is a type of bankruptcy that allows individuals and businesses to get relief from debts they can't pay. It's also known as liquidation bankruptcy. 

In a Chapter 7 bankruptcy, a trustee is appointed to: 

• Take over the debtor's assets 
• Sell the debtor's nonexempt assets to cash 
• Distribute the cash to the debtor's      creditors 

The debtor can keep some of their property, known as exempt property, and may be able to keep some real estate depending on state and federal laws. 

To qualify for Chapter 7 bankruptcy, a debtor must pass a means test. This test involves comparing the debtor's monthly income to the state median income for a household of the same size. If the debtor's income is below the median, they automatically qualify. If their income is above the median, they can still qualify if they can show that their disposable income is below the median. 

A Chapter 7 bankruptcy can stay on a debtor's credit report for up to 10 years.