Bankruptcy Chapter 7
Usually identified as liquidation bankruptcy, it involves the sale of a debtor's non-exempt assets by a trustee. Any proceeds acquired by the bankruptcy trustee are then turned over to creditors.
In Chapter 7 bankruptcy, some of your property may be sold to pay down your debt. And in return, all or most of your unsecured debts (debts for which guarantee has not been assured) will be removed. You get to keep any property that is classified as exempt under the state or federal laws available to you (such as your clothes, car, and household furnishings). Allot of debtors who file for Chapter 7 bankruptcy are pleased to learn that all of their property is exempt.
Not everyone can file for Chapter 7 bankruptcy. For example, if your disposable income is not enough to fund a Chapter 13 repayment plan -- after subtracting certain allowed expenses and monthly payments for certain debts -- you won't be allowed to use Chapter 7 bankruptcy.
Chapter 7 bankruptcy is a process of liquidation of personal or business assets because the person or business cannot pay debts. Under Chapter 7, a trustee is appointed to oversee the sale of all business assets, which are distributed to creditors. The process begins with a petition from the debtor. The petition includes financial statements and lists all creditors and the amounts of their claims. A trustee is appointed by the court. There are several meetings with the creditors to discuss their claims and attempt to work out agreement on the amounts each will receive. The trustee then liquidates all the business property and allocates the money to the creditors according to the priority debt claims determined by bankruptcy laws.