About Chapter 7 Bankruptcy

Chapter 7 bankruptcy is also known as a "liquidation". Under this chapter of the bankruptcy code, an individual or business can file for bankruptcy and is thereby known as a debtor. Bankruptcy laws provide the debtor protection from creditors and create a bankruptcy estate of the assets of the debtor. Once the case is filed, all inquiries and resolutions are made through the bankruptcy court. Upon completion of the bankruptcy case, any assets available are paid to creditors and most debts are eliminated.

In many bankruptcy cases, the individual filing will have little or no assets which are available to creditors since most assets can protected through state and federal laws known as exemptions. This is known as a "no-asset" case.

Should assets be available to creditors, those items can be seized and sold by the appointed bankruptcy trustee to pay upon the creditors. Alternatives are available in lieu of an asset being sold or otherwise "administered" on a case by case basis.

While chapter 7 bankruptcy is also available to business, business are not afforded the same exemptions and asset protection provided to individuals. In a business context, assets are sold and paid to creditors to fulfill their obligations. Often times, a chapter 7 business bankruptcy is not needed and a business can be dissolved through the secretary of state.