What Is Chapter 7 Bankruptcy?

Chapter 7 bankruptcy is often referred to as “liquidation bankruptcy,” but that label can be misleading. Many people worry that filing Chapter 7 means losing everything they own. In reality, most Chapter 7 filers in Alabama keep all—or nearly all—of their property due to state and federal bankruptcy exemptions.

Chapter 7 is designed to eliminate unsecured debts, including:

• Credit card debt
• Medical bills
• Payday loans
• Personal loans
• Certain judgments

Once your case is complete, these debts are typically discharged, meaning you are no longer legally required to pay them. The goal is simple: to give you a clean slate and a chance to rebuild.

How Chapter 7 Bankruptcy Works

Filing for Chapter 7 bankruptcy follows a structured legal process, but it’s often much simpler than people expect.

The Automatic Stay

As soon as your case is filed, the court issues an automatic stay. This powerful legal protection immediately stops:

• Collection calls
• Lawsuits
• Wage garnishments

For many clients, this instant relief is one of the biggest benefits of filing.

The Bankruptcy Trustee and 341 Meeting

After filing, a bankruptcy trustee is assigned to your case. The trustee’s role is to review your financial information and ensure everything is accurate.

About 30 days later, you’ll attend a brief hearing called the 341 Meeting of Creditors. Despite the name, creditors rarely appear. The meeting typically lasts 5–10 minutes, and your attorney will prepare you ahead of time so you know exactly what to expect.

Who Qualifies for Chapter 7 in Alabama?

Not everyone qualifies for Chapter 7, but many people do.

Eligibility is primarily determined by:

• Your household income
• Your assets
• Whether you pass the means test

The means test compares your income to the median income for a household of your size in Alabama. Even if your income is above the limit, you may still qualify based on your expenses. During a free evaluation, our team reviews your financial situation and helps you determine the best path forward.

Example:

Consider Sarah, a single mother in Birmingham. After a medical emergency and months of relying on credit cards, she found herself drowning in debt. Collection agencies were calling daily, and her wages were being garnished.

After meeting with Alabama Bankruptcy Relief Center, Sarah learned she qualified for Chapter 7. Once her case was filed:

• The wage garnishment stopped immediately
• Collection calls ended
• Her medical bills and credit card debt were discharged

Within a few months, Sarah was debt-free and able to focus on rebuilding her finances and caring for her family.

How Long Does Chapter 7 Take?

Chapter 7 bankruptcy is one of the fastest forms of debt relief. Most cases are completed in 4 to 6 months from filing to discharge. Once it’s over, you walk away free from most unsecured debts and with the opportunity to start fresh.

Is Chapter 7 Right for You?

Chapter 7 bankruptcy isn’t about failure—it’s about financial recovery and protection. If debt is preventing you from moving forward, Chapter 7 may offer the relief you need.

At Alabama Bankruptcy Relief Center, we guide clients through every step of the process with clarity, compassion, and experience.

If you’re ready for a financial reset, contact us today at 205-846-9954 or use the contact form below, and find out if Chapter 7 bankruptcy is right for you.