What is Chapter 7 bankruptcy?
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. The debtor receives a discharge of all dischargeable debts usually within four months. In the vast majority of cases the debtor has no assets that he would lose. In other words in most cases the debtor does not have property that can be lost to the trustee since the property is protected by the State & Feral exemption laws. The idea is that a Chapter 7 will give that person a relatively quick “fresh start”. One of the main purposes of Bankruptcy Law is to give a person, who is hopelessly burdened with debt, a fresh start by eliminating many of the debts.
Chapter 7 deals with liquidation or the sale of all non-exempt assets by a trustee appointed by the Bankruptcy Court. The sale proceeds are used to pay creditors. A debtor receives a discharge, which releases the debtor from all dischargeable debts. Creditors are ordered to permanently stop attempting to collect the discharged debts. After the discharge of a debt, a debtor is relieved of any continuing or future obligation to pay the debt.
Chapter 7 is that part of the United States Bankruptcy Code that deals with liquidation, which means the selling of all non-exempt assets by a court appointed trustee. The proceeds of the sale are used to pay creditors. In return, a debtor receives a discharge, which releases a debtor from all dischargeable debts and orders creditors to forever stop their attempts to collect the discharged debts.
A Chapter 7 bankruptcy is commonly referred to as a “liquidation” or “straight” bankruptcy. The purpose of chapter 7 bankruptcy is to permit the honest debtor the ability to discharge most of his obligations to his creditors while retaining sufficient assets to obtain a “fresh start”. A chapter 7 bankruptcy trustee is appointed to facilitate both the discharge of the debtor’s debts as well as the liquidation of all property in excess of the amount deemed necessary under the Bankruptcy Code for the debtor’s “fresh start”. The property deemed necessary for the debtor’s “fresh start” is commonly referred to as “exempt property”. The chapter 7 bankruptcy trustee may only liquidate the debtor’s non-exempt property. In exchange, the debtor is issued a chapter 7 discharge, freeing him of most (if not all) of his debt. Most debtors, especially in Texas, own only exempt property resulting in the chapter 7 bankruptcy trustee taking nothing. Such cases are commonly referred to as “no asset” cases
There are several types of bankruptcies designed to cover the specific needs of a wide variety of debtors. One of the most common forms of bankruptcy is Chapter 7, also known as liquidation, and it allows debtors to absolve their debts through the sale of nonexempt property and the dispersal of the proceeds to creditors. Liquidation is one of the types of bankruptcy that Americans are most familiar with, but most people have misconceptions about liquidation and most individuals who qualify are unaware of the benefits it can offer.
Chapter 7 Information
Chapter 7 bankruptcies allow individuals and business to erase debts that they may otherwise have no ability to pay while helping creditors collect on debts owed. The misconception which is most common about Chapter 7 bankruptcy is that individuals and businesses will lose all properties and assets. Although a Chapter 7 bankruptcy filing may force a company out of business this is not always the case and individuals are offered a set dollar amount of exempted property. Chapter 7 bankruptcies make allowances for exempt property so it is possible for people to use a liquidation to resolve their debts without giving up their cars and home. The main advantage of Chapter 7 bankruptcies over all others is that they are usually quickly discharged, often within 60 to 90 days after the meeting of creditors, and allow those who file to get a fresh financial start in months rather than years.
Filing Chapter 7 Bankruptcy
Filing a Chapter 7 bankruptcy rather than other forms of bankruptcy makes sense in many cases, however, understanding which situations are best suited for liquidation as opposed to other options is often something only an experienced bankruptcy attorney can do. There are subtle differences between the 6 types of bankruptcies and consulting an experienced attorney is often the only way to make sure the best bankruptcy decision is made.
If you live in the Denver Colorado area and are considering bankruptcy, contact us at the Norton Law Offices for help in determining your best financial option.
