Chapter 7 Bankruptcy

Chapter 7 Bankruptcy Overview

Chapter 7 Bankruptcy is governed by Chapter 7 of the Bankruptcy Code. Chapter 7 Bankruptcy is also known as a liquidation bankruptcy because debtors must liquidate non-exempt assets. This means the non-exempt assets are sold by the Chapter 7 Trustee for the benefit of creditors.

Fortunately, most consumer debtors’ assets are fully exempt under state or federal law and no assets are sold. When there are no assets to sell, the chapter 7 case is usually short and lasts approximately 3 months.
Clients might consider a Chapter 7 Bankruptcy if he or she has mainly unsecured debts, is current on the secured debts he or she wants to keep, has not filed another chapter 7 in the last 8 years and meets the income requirements. A business that plans to close might consider filing Chapter 7 Bankruptcy. Often, the business will attempt to reorganize but will later convert to a chapter 7 if the reorganization is unsuccessful. After filing a Chapter 7, Debtors will attend a meeting of creditors with their attorney. This meeting will occur 30 to 45 days after filing. Although the meeting with the Chapter 7 Trustee is called a “Meeting of Creditors,” creditors are unlikely to attend. However, creditors and other parties have 60 days following the conclusion of the meeting to object to a debtor’s discharge. If no objection is made, the Court can enter an order of discharge.
For more information about Chapter 7 Bankruptcy, be sure to see our Chapter 7 eBook.

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Dallas, Texas 75231