Automatic Stay

• After you file your petition for Chapter 7 bankruptcy, the court will issue an automatic stay. The automatic stay demands your lender and other creditors to stop collection activity. Phone calls and letters will cease. If the foreclosure process has begun, the action will come to a halt until the bankruptcy is finalized. In some cases, the lender can request that the court lift the automatic stay. An automatic stay lift is uncommon in Chapter 7 bankruptcy, however.
  
  

How it Helps

• You cannot keep your home in Chapter 7 bankruptcy. The bankruptcy can delay the process for up to several months. Use the extra time as an opportunity to make other housing arrangements. In Chapter 7, your debt is discharged. You will not be required to pay the remaining balance or delinquent debt. Even though you lose your home, a foreclosure is not listed on a credit report. Only the bankruptcy will be reported to the credit bureaus. Chapter 7 bankruptcy will have a negative impact on your credit score for a minimum of 10 years from the date of filing.
  
  

Counseling Requirements

• You must complete a pre-bankruptcy counseling session within180 days prior to filing for bankruptcy. Depending on how long the foreclosure process takes in your state, this may leave you little time to file the petition. If you are concerned about the possibility of foreclosure, participate in counseling as soon as possible. If you cannot afford counseling, the agency is required to provide you the service free of charge. You will also need to complete a pre-discharge debtor education course after your petition is filed. Counseling and debtor education must be administered through an organization approved by the Department of Justice's U.S. Trustee Program.
  
  

Means Test

• If you intend to file Chapter 7 bankruptcy, you must meet income restrictions through what is known as the "means test." If your income is at or below the median income for your state, you automatically pass the test. If your income is too high, certain allowed expenses and debt are subtracted from your monthly income. The remaining amount is your disposable income. If your projected disposable income is $6,000 or less for five years, or $100 a month, you meet the criteria. If you exceed the limit, further calculations will be used to determine your filing eligibility. Generally, if your disposable income is enough to pay off delinquent debt through a repayment plan lasting 3 to 5 years, you will be only be allowed to file Chapter 13 bankruptcy.