In a Chapter 7 bankruptcy, all of your assets above certain state-exempted levels are sold to pay creditors. If all of your assets are state-exempted, you have what is known as a "no-asset" case, in which none of your assets are sold. In both cases, most of your existing debts are discharged. After a Chapter 7 case is discharged, your dealings with the court are complete, but various aspects of your life will have changed.
Time Frame
Bankruptcy law states that you can file for Chapter 7 bankruptcy only once every eight years. After your bankruptcy is discharged, the clock starts ticking. But you can file for a Chapter 13 bankruptcy just four years after you receive a Chapter 7 discharge. In a Chapter 13 bankruptcy, you set up a payment plan with the courts and get to keep your assets, as opposed to a Chapter 7, in which you liquidate your nonexempt assets and generally pay nothing to your creditors.
Old Creditors
Once your Chapter 7 bankruptcy is successfully discharged, most of your creditors at the time you filed bankruptcy no longer have the right to pursue your debts. Important exceptions to this law include any tax debts that you owe the IRS or state taxing authorities, or any student loans you owe. If creditors such as credit card companies contact you after your debt is discharged, they are in violation of the law and could face legal sanctions if you choose to pursue them.
Credit Reports
After your bankruptcy is discharged, the three credit reporting agencies are required to show the bankruptcy information for a full 10 years. During this time, anyone who pulls your report will see this negative information, including landlords, loan companies and potential employers.
New Creditors
After your bankruptcy discharge, you may find it hard or impossible to obtain credit, and if you do, it will usually be at a high interest rate. Surprisingly, many people who successfully file bankruptcy are actually inundated with credit offers, as creditors know that you cannot file bankruptcy again for eight years and therefore cannot escape any debts that you incur with them.
Fresh Start
While a Chapter 7 bankruptcy is known as a "liquidation" bankruptcy, it is also called a "fresh start" bankruptcy in that you emerge from the bankruptcy with few or none of your debts. Other bankruptcies, such as the Chapter 13 bankruptcy, require payment plans in which you repay creditors over a period of three to five years, but the Chapter 7 bankruptcy liberates you from these debts without a payment plan.
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