What Is A Chapter 7 Bankruptcy?
Bankruptcy is a legal proceeding in which a person who cannot pay his or her bills can get a fresh financial start. The right to file for bankruptcy is provided by federal law, and all bankruptcy cases are handled in federal court. Filing bankruptcy immediately stops all of your creditors from seeking to collect debts from you, at least until your debts are sorted out according to the law. Chapter 7 is a way to legally discharge or cancel your indebtedness. Chapter 7 gives a person a fresh start on your economic life within certain limitations. A person can only file a Chapter 7 once every 6 years. Moreover, certain types of debts are not dischargeable. Chapter 7 is not for everyone. For example, it is not for people who run up their credit cards with the intent of shortly thereafter going into bankruptcy. Bankruptcy is not for people who deliberately charges much more than they could ever pay just to discharge those debts. Bankruptcy is not for anyone who basically acts in a dishonest
Chapter 7 bankruptcy is called a liquidation bankruptcy. It is intended to give the individual debtor a fresh start. Debts such as credit cards, medical bills and lawsuits are discharged. The debtor keeps most of their property (exemptions) that are not considered luxuries In most consumer cases, all the assets are exempt, and therefore there are no assets to liquidate and there is no money to be paid to creditors. Back to top.
Chapter 7 bankruptcy is a liquidation proceeding. The debtor turns over all non-exempt property to the bankruptcy trustee, who then converts it to cash for distribution to the creditors. Within 4 to 5 months after filing a Chapter 7 bankruptcy, the debtor receives a discharge (i.e., a “wiping out”) of all dischargeable debts.
Chapter 7 is the liquidation chapter of the Bankruptcy Code. Chapter 7 cases are commonly referred to as “straight bankruptcy” or “liquidation” cases, and may be filed by an individual, corporation, or a partnership. Under chapter 7, a trustee is appointed to collect and sell all property that is not exempt and to use any proceeds to pay creditors. In the case of an individual, the debtor is allowed to claim certain property exempt. In exchange for this, the debtor gets a discharge, which means that the debtor does not have to pay certain types of debts. Corporations and partnerships do not receive discharges. Consequently, any individuals legally liable for the partnership’s or corporation’s debts will remain liable. Therefore, individual bankruptcies may be required as well as the corporation or partnership bankruptcy. 12.
Chapter 7 bankruptcy is the most common type of bankruptcy and is often referred to as a “liquidation bankruptcy.” In Chapter 7, all of the debtor’s assets, other than those types of assets specifically exempt from liquidation by statute, are turned over to a bankruptcy trustee for sale. Sale proceeds, if any, are distributed among the creditors. Most Arizona Chapter 7 debtors have little non-exempt personal property because of Arizona’s liberal exemption laws. Chapter 7 bankruptcy is used to eliminate, or discharge, primarily unsecured debts such as credit cards or medical bills. Chapter 7 does not eliminate secured debts, such as vehicles (unless the secured item is surrendered).
