What is chapter 7 Bankruptcy?
Chapter 7 bankruptcy involves the liquidation of all of the debtor’s non-exempt assets in exchange for a discharge of all of his debts. Individuals, corporations, partnerships, and LLCs may be debtors in Chapter 7.
Advantages of Chapter 7 Bankruptcy
After a Chapter 7 petition is filed, the Office of the United State Trustee will appoint a Chapter 7 trustee to administer the case. The trustee will examine the schedules filed and the debtor’s records and will question the debtor to determine if any nonexempt assets exist. If sufficient non-exempt assets are available to make a meaningful distribution to creditors, then the trustee will seize and sell these assets and distribute the funds to creditors.
After a Chapter 7 petition is filed, the Clerk of the Bankruptcy Court will schedule an Initial Meeting of Creditors (“Creditors’ Meeting” or “341 Meeting”) at which the trustee will question the debtor about his assets and debts. In addition, creditors and other parties in interest may appear and question the debtor as well. Note that these meetings tend to be brief in duration, so it is not possible to conduct extensive questioning of the debtor. The Creditors’ Meeting is usually held four to eight weeks after the petition is filed.
If the Chapter 7 trustee finds that there are no non-exempt assets available for creditors, then he will issue a “No Asset Report” and will close the case as a “No Asset Case.” A discharge order is generally mailed by the Court sixty days later. If the trustee does administer the case, the process can take much longer, depending on whether the assets are easily liquidated, such as publicly traded securities or automobiles, or more difficult to liquidate, such as a personal injury lawsuit.
From the debtor’s perspective, the entire process from filing to discharge usually takes about four months.
Who Qualifies to file for Chapter 7 Bankruptcy?
In order to qualify for chapter 7 bankruptcy you must be an individual, a partnership, or a corporation or other business entity.