What is Chapter 7 Bankruptcy?
Chapter 7 bankruptcy is the most common form of bankruptcy in the United States. Chapter 7 sets the rules for the liquidation of a person’s or business’s assets to pay their debtors.
Chapter 7 Bankruptcy for Businesses
If a business is unable to pay its creditors or make payments on the debt, the business may choose to file for chapter 7 bankruptcy. A business may also be forced to file for bankruptcy by its creditors. One of the first steps is to appoint a Chapter 7 Trustee. The trustee will examine the business’s assets and make the decision whether to continue business operations. The trustee oversees the process of liquidating the assets and distributing them fairly to the creditors. Fully secured creditors with collateral equal or greater than the amount they are owed are entitled to the collateral or its value. These rights do not change after filing for bankruptcy. For partnerships and corporations, after the assets have been the distributed the business is dissolved but the unpaid debt still exists theoretically. Businesses owned by an individual can receive a chapter 7 discharge relieving the individual of the remaining debt.
Chapter 7 Bankruptcy for Individuals
Individuals file for Chapter 7 bankruptcy because they can keep certain property if it is deemed exempt from creditors. The value of the property that can be claimed as exempt varies from state to state. If property is exempt, a lien on that property for a mortgage or auto loan often remain after the bankruptcy filing. All other property and assets are liquidated and distributed to creditors. Our team can also help with foreclosure defense. Many types of unsecured debt (debt without collateral) are cleared after the bankruptcy filing; however, some common exceptions include child support, income taxes in the past 3 years, property taxes, and student loans.
A chapter 7 bankruptcy filing stays on the individual’s credit report for 10 years after the filing.
How Bankruptcy Attorneys Help
A bankruptcy attorney can help decide the right time to file for bankruptcy, as well as determine if the case qualifies for chapter 7 bankruptcy or needs to file for chapter 13. The attorney ensures that all the requirements for bankruptcy are fulfilled so the process can be completed as quickly as possible. There are ways to file for bankruptcy without the help of an attorney by filling out federal forms or buying certain software, however the process is very complicated.
If you are considering filing for bankruptcy or desire a legal consultation to explore your options to financial freedom talk with us today.