Why File for Chapter 7 Bankruptcy?

The underlying principal of chapter 7 bankruptcy is to afford an individual a “fresh start.” Bankruptcy is aimed to protect the “honest but unfortunate debtor.”

An individual or business that files for bankruptcy is afforded two responsibilities (1) full disclosure and (2) honesty under the penalty of perjury. With full honest disclosure of their financial information, assets, income and creditors, the court bankruptcy court, the appointed trustee and debtor can determine how to pay creditors while eliminating the debtor's respective debt.

In many chapter 7 cases, no assets are available to be distributed to creditors. This type of "no-asset" asset case results in a notice upon administration of the case by the trustee and a discharge order provided by the associated bankruptcy judge. Once a discharge order is filed by the court (which is roughly 4 - 6 months after filing the bankruptcy petition) the debtor is no longer has the legal obligations to those debts discharged.

Thereby providing a “fresh start” free of debt.

In a situation where assets exist to distribute to creditors, the debtor has two options (1) to allow the court, through the appointed trustee to administer and liquidate the asset to pay creditors or (2) to provide equivalent cash-collateral for the trustee to distribute evenly upon the creditors. Once administered and completed, even the debtor with assets is given the benefit of a “fresh start”.