What Is Chapter 7 ?
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. |
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When a business plunges deep into debts, more than it could handle, the owner then may be forced to file for bankruptcy. Keeping in mind his assets, he files for Chapter 7 bankruptcy in a federal court. This helps in getting the person out of the situation within a short period of time, provided he has the right worth of assets to liquefy.
To file under Chapter 7 of bankruptcy code in the US, apart from listing out all the liabilities and assets you have, you need to keep a tab on all your creditors, along with their claims. Another list is to be drawn that shows all the leases and executory contracts that are still valid till the time of filing the bankruptcy at least. All the financial documents, the annual income and the bank statements of the past three years, repossessions, pending debts and foreclosures should also be documented properly before carrying out with the procedure.
An individual can retain a certain part of his property from the getting liquefying under the Chapter 7 clauses. It is necessary for the debtor to list out all the financial details, the debts, etc to the court for it to decide how to deal with the things. He can appoint a good legal advisor or a lawyer specializing in bankruptcy to help him in this process in a fair way.
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Most people in debt prefer filing for Chapter 7, as it gets rid of most of the unsecured debts. But every debtor does not qualify for Chapter 7. In few cases, repaying debt partly over time may be court-approved. Chapter 13 repayment method has benefits that are generally not available in Chapter 7.