Chapter 7 Bankruptcy: Liquidation Under the Bankruptcy Code
Allows individuals to keep certain exempt properties and sell non-exempt assets and use the proceeds of such assets to pay creditors in accordance with provisions of the Bankruptcy Code.
Individuals Filing Chapter 7
In a Chapter 7 bankruptcy, the individual is allowed to keep certain exempt property, and most liens, such as real estate mortgages, survive. Other assets, if any, are sold (liquidated) by the interim trustee to repay creditors. Many types of unsecured debt are cancelled. There are general classes of debt not discharged in a Chapter 7.
Common exceptions to discharge include child support, most taxes, most student loans (unless the debtor prevails in a difficult-to-win adversary proceeding brought to determinate the dischargeability of the student loan), fraud or misrepresentation in obtaining credit, and fines and restitution imposed by a court for any crimes committed by the debtor.
Consumer credit and creditworthiness is a complex subject, however. Future ability to obtain credit is dependent on multiple factors including income and post-bankruptcy obligations.
Another aspect to consider is whether or not the debtor can avoid a challenge by the United States Trustee to his or her Chapter 7 filing as abusive. One aspect of whether the U.S. Trustee can prevail in a challenge to the debtor’s Chapter 7 filing is whether or not he can otherwise afford to repay some or all of his debts out of disposable income in the three year time frame provided by Chapter 13. If so, then the U.S. Trustee may succeed in preventing the debtor from receiving a discharge under Chapter 7, effectively forcing the debtor into Chapter 13.
Creditworthiness and the likelihood of receiving a Chapter 7 discharge are only a few many issues to be considered in determining whether to file bankruptcy. The importance of the effects of bankruptcy on creditworthiness is sometimes overemphasized because by the time most debtors are ready to file for bankruptcy their credit score is already ruined.
One of the immediate benefits of filing for bankruptcy is an “automatic stay”, which stops any lawsuit filed against you and most actions against your property by a creditor, collection agency, or government entity. It is designed to prevent amongst other things: utility disconnections, foreclosures/evictions, and multiple wage garnishments.
Businesses Filing Chapter 7
A Chapter 7 filing means that the business intends to sell all its assets, distribute the proceeds to its creditors, and then cease operations.
This may or may not mean that all employees will lose their jobs; when a very large company enters Chapter 7 bankruptcy, it may be that entire divisions of the company are sold intact to other companies during the liquidation.
Secured creditors, such as bondholders, have a higher-priority claim on the proceeds than unsecured creditors, such as vendors who have not yet been paid for products they previously delivered to the company.
A corporation or other legal entity that is a debtor under Chapter 7 is not entitled to a discharge of its debts: once all assets of the company have been fully administered, the case is closed and the debts of the entity, theoretically, continue to exist.
How We Can Help You with Chapter 7 Bankruptcy
First Steps – Know What’s Involved
Chapter 7 is a liquidation bankruptcy enabling you to wipe out your general unsecured debts such as credit cards and medical bills. It may also wipe out your secured debts if you decide to surrender the collateral. To qualify for Chapter 7 bankruptcy, you must have little or no disposable income. If you make too much money, you may be required to file a Chapter 13 bankruptcy.
There are certain required documentation to file for any types of bankruptcy. Everyone’s situation is unique so we will assess yours to determine if there are any additional appropriate and necessary requirements to enable us to swiftly commence the bankruptcy filing.
Bankruptcy cases typically could be completed and discharged within 3-6 months of filing. If involves court filings that disclose debts, assets, income, expenses and other financial information. It requires appearance before a bankruptcy Trustee at a creditors meeting.
We are highly experienced in Bankruptcy Law and will be with you every step of the process to ensure a favorable outcome.
Why Choose Sawyer and Azarcon, PC
We have almost 30 years of experience in Bankruptcy Law. Over the years, we have assisted numerous clients getting through the bankruptcy process successfully and start fresh. We invite you to read some of what our clients have to say about us in our Client Testimonials page.
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