If you are looking to wipe out all of your debt and have a fresh start, Chapter 7 may be the best option for you. Of all the types of bankruptcies Chapter 7 is the most all-encompassing, because it covers not only individuals, but also corporations, partnerships and sole proprietorships. It is also the most expedient bankruptcy process of them all.
How Does Chapter 7 Work?
Chapter 7 proceedings commence upon the filing of a petition. A bankruptcy trustee is then appointed by court to gather and liquidate all of the debtor’s non-exempt property, the proceeds of which are used to repay creditors.
Typically, Chapter 7 bankruptcy is sought by individuals with minimal, if any, assets. In these instances, the bankruptcy trustee has no assets to liquidate.
Not all property can be liquidated by the trustee in Chapter 7 proceedings. Some property is exempt and the debtor is allowed to keep that property in their possession. Whether or not your property is exempt from liquidation is determined by your state’s law, which can change from state to state.
341 Meeting of Creditors
Within 30 days of filing a Chapter 7 petition, the debtor’s case is scheduled for a 341 meeting of creditors. The debtor must be present at the 341 meeting, and will be required to testify under oath as to their personal properties and debts. The creditors, if present, are allowed to question the debtor as well.
The creditors can, within sixty (60) days of the 341 meeting, attempt to convince the bankruptcy court and trustee that the debtor should not be discharged from their debts.
Following successful Chapter 7 proceedings, the debtor is discharged from most of their unsecured debt, and retains possession of any exempt property. All debts included in the bankruptcy petition are then barred from pursuing any action against the debtor. However, complete discharge of debt is not an available option for partnerships and corporations.
Debtors as a whole are not limited to Chapter 7 liquidation alone. Chapter 11 may be an option for debtors engaged in the operation of a business; and Chapter 13 is available to debtors that need to establish a plan of repayment to their creditors.
For more information regarding your state’s bankruptcy exemptions, contact Real World Law, PC attorneys today.