What is the Chapter 7 Process?
Chapter 7 is called a liquidation proceeding. Each state has set a limit on how much property a debtor may keep after he or she files for bankruptcy. Some states use the federal exemption laws found in the Bankruptcy Code and others use their own state law. An Interim Trustee is appointed to administer the case. He or she questions the debtor at a meeting of creditors to determine whether the debtor has more property than the law allows. The vast majority of people filing Chapter 7 do not own more property than they are allowed to keep. Those who do own more than the bankruptcy law permits will have to turn over the non-exempt property to the Interim Trustee. The Trustee will then sell the property and use the proceeds to pay the debtor’s creditors.
