What Is Chapter 7 Bankruptcy ?
Chapter 7 is a type of bankruptcy which is applied in the US where the assets of business or individuals, are generally liquidated, to pay with a portion of what they have or may be the whole of it. Thus, different types of debts are eliminated. Chapter 7 is sometimes referred as “straight bankruptcy”. |
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The process of filing Chapter 7 bankruptcy begins with filing the papers with the bankruptcy court. The debtor should be able to show that he or she is not eligible for reorganization or repayment plans, and then provide the list of all the assets. The court reviews information and it determines that a debtor has to go through a liquidation bankruptcy. Creditor meeting should be scheduled, in which a debtor and his creditors discuss about the assets which have be liquidated. In this meeting the creditors usually agrees to take partial payment of the debt. Creditors can refuse to cancel a debt, if they think the debt was connected to unlawful or fraudulent activities. Some types of debts such as student loans cannot be easily erased under Chapter 7.
Five to six months are usually required, for Chapter 7 proceeding, and this process can become quite involved. A few debtors use bankruptcy lawyer to take care of the case, though one can file the same on their own. In each of the cases, there are certain assets which are ruled exempt, that means it cannot be sold. The creditors determine that other assets may be worthless. So, they are treated as an exempt and even if they are not. The sales of assets are managed by a trustee, who tries to get the best possible prices.
People filing for Chapter 7 bankruptcies should attend credit counseling. After filing the bankruptcy, it gets difficult in obtaining credit for many years thereafter. It is impossible to file bankruptcy again for a particular period of time. A credit counselor often helps people to rebuild their credit status.
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Chapter 7 is a part of the Bankruptcy Code - Title 11 under the US Code. This chapter deals with liquidation of a bankrupt person’s assets to help him tide over the phase. It is the most common clause looked up and researched by an American citizen, filing for bankruptcy.