Chapter 7 wipes out unsecured consumer debt, and it does it completely. Credit cards, medical bills, personal loans, payday loans, repossession deficiencies, most civil judgments and most old collection accounts are gone at discharge, usually about four months after filing.
Gone means gone. The creditor cannot call, sue, garnish, or report the balance as owing, and the debt does not come back if your income improves later.
The main list
- Credit cards, store cards and charge accounts, including the balance run up last year
- Medical bills, including anything already sent to collections
- Personal loans and signature loans from banks, credit unions and online lenders
- Payday loans and title loan deficiencies
- The deficiency after a car is repossessed or a house is foreclosed
- Old utility balances, gym contracts, broken leases and cell phone termination fees
- Most money judgments from collection lawsuits, even one already entered against you
- Business debts you personally guaranteed, if the business is closed
- Money owed to friends and family (yes, really, and yes, you still have to list them)
Judgments and garnishments
A wage garnishment in California can take up to 25 percent of your disposable earnings. Filing stops it, typically within a day or two of the notice reaching your employer's payroll department, and the underlying judgment is then discharged along with everything else. One caveat. If the creditor recorded an abstract of judgment against real property you own, the discharge kills your personal liability but the recorded lien can survive on the house. That lien often has to be avoided by motion, which is a separate filing we handle inside the case.
Recent charges get looked at
Luxury purchases over a set amount within 90 days of filing, and cash advances over a set amount within 70 days, are presumed non-dischargeable. It is a rebuttable presumption, not an automatic loss, but running up a card knowing you plan to file is the fastest way to draw an adversary proceeding.
Secured debt is different
Your personal obligation to pay a car loan or a mortgage is discharged. The lien is not. If you keep the collateral and stop paying, the lender takes it back, and it can do that after your case closes without violating the discharge. So the practical question on a car or a house is never really whether the debt discharges. It is whether you want to keep the thing, and whether you can afford the payment going forward.
“I'll be blunt about one thing. If a debt is dischargeable, the collector on the phone right now knows that better than you do. It is why the calls get aggressive in the weeks before people file.”
Naomi Reyes-AshfordCheck your credit report ninety days after discharge
Discharged accounts should report a zero balance with a notation that the debt was included in bankruptcy, though they do not vanish from the report. Roughly a third of the reports I review after a case still show at least one account carrying a balance, and that is worth disputing in writing.
Questions we get asked
Can I leave one credit card out so I can keep using it?
No. Every debt goes on the schedules, and the issuer will almost certainly close the account when the notice arrives anyway, whether or not there is a balance.
What happens to a lawsuit already filed against me?
The automatic stay halts it on the day you file. Once the discharge enters, the case is typically dismissed as to you.
Does the discharge cover debt I forgot to list?
In a no-asset case it usually does, but the safe answer is to list everything. Reopening a case to add a creditor costs money and time.
Will my medical provider refuse to treat me afterward?
A private practice can decline to keep you as a patient. Hospitals and emergency care cannot turn you away over a discharged balance.
What to do next
Pull all three credit reports at annualcreditreport.com and add anything the reports miss, especially medical bills and loans from family. That list is the working document for the whole case.