Chapter 7
Chapter 7 bankruptcies, or “liquidation bankruptcies,” typically are the most common form of bankruptcy intiated by the consumers. Chapter 7 proceedings begin with the debtor’s filing of a petition with the bankruptcy court, which triggers the automatic stay -preventing all debt-collection activity. Upon taking taking the pre bankruptcy class and filing bankruptcy the court appoints a trustee who oversees the case and liquidates the debtor’s nonexempt assets( if they have any) to pay off eligible debts to the extent possible.
Not all of the debtor’s assets will be sold in a Chapter 7 bankruptcy case because the law specifies that certain property is exempt from liquidation. For many typical consumers, all of their property is exempt or already subject to valid liens, so eligible debts will be discharged without the loss of any property. This situation is commonly called a no-asset case.
Once the trustee has collected any nonexempt assets and paid creditors from the proceeds, any remaining unpaid debts are discharged, meaning that they no longer exist and the debtor has no further obligation to pay them. Some debts, however, are nondischargeable and remain valid, such as taxes, domestic support obligations and damages resulting from a debtor’s willful or malicious acts.
Any remaining unpaid debts are discharged, meaning that they no longer exist and the debtor has no further obligation to pay them. Some debts, however, are nondischargeable and remain valid, such as taxes, domestic support obligations and damages resulting from a debtor’s willful or malicious acts.
