Chapter 7 is the simplest and most common form of bankruptcy available: the debtor exchanges their non-exempt assets, if any, for the release of their dischargeable debts. In nearly all consumer cases, however, the debtor’s property is exempt and is excluded from the bankruptcy estate.
Protection from Creditors: The commencement of the case triggers an injunction (called a “stay”), which prohibits all creditors from beginning or continuing any effort to collect from you including garnishment of wages or bank accounts, repossession of vehicles, and foreclosures of property. Any action taken by a creditor after the stay comes into effect is legally void and may subject the creditor to monetary sanctions in your favor.
Discharge: a discharge is the legal forgiveness of a debt. It eliminates your personal liability for a debt. A bankruptcy discharge, however, does not eliminate liens that are attached to assets before a bankruptcy case is filed. There is an exception, however, if the court grants a motion avoiding a lien. There are certain debts that are not dischargeable in Chapter 7. These nondischargeable debts include recent or unfiled taxes; debts incurred by various forms of dishonesty; student loans, restitution awards; debts arising in a divorce; and legal penalties.