Chapter 7 is liquidation bankruptcy although not very often is anything actually liquidated. Generally, chapter 7 is available to individuals and businesses. A voluntary chapter 7 proceeding is initiated by the filing of bankruptcy petition by the debtor, typically through his attorney. An involuntary chapter 7 may be filed by the debtor's creditors although this is seldom seen.
In chapter 7 bankruptcy cases, a bankruptcy trustee is appointed to administer the non-exempt assets, if any, of the debtor. If there are assets to administer, the trustee will distribute the proceeds to creditors. In exchange for surrendering these assets, an individual debtor ordinarily receives a discharge of personal liability for most pre-petition debt. Thus, an individual debtor's prior financial struggles effectively end with the filing of a chapter 7 bankruptcy. The debtor is then free to start fresh from the date of filing forward.
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Not all debts are eliminated by the filing of a Chapter 7 bankruptcy case. For example, student loans, recent taxes, child support, spousal support, traffic fines and other debts are not eliminated. The debtor can still file a Chapter 7 to eliminate other debts; however, those listed above will survive the bankruptcy filing. The debtor still receives a significant elimination of debt.
The case involves at least one court appearance known as the 341 meeting of creditors. It is at that meeting where the trustee examines the debtor under oath. Creditors have the opportunity to appear; however, seldom do they take the time in a Chapter 7 case. You can learn even more by speaking with an experienced bankruptcy lawyer in your local area.
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