The term Chapter 7 bankruptcy is a term that is thrown about a great deal in the media, but clear and concise explanations of the term are usually not offered. Because of this, there is some confusion of what exactly chapter 7 bankruptcy actually is and this confusion sometimes leads to people making critical errors in judgment when the individual contemplates such a filing.
Certainly no one wants to become involved in bankruptcy proceedings. There is good reason for this. In order to enter bankruptcy proceedings, a person will have to have debts that greatly exceed his or her net worth and, in addition, have no visible or viable means of paying back the debts. When a person or corporation finds itself in such a position, there becomes the need to file for bankruptcy protection. This is a legal situation and it requires the courts to rule in the matter. There are a number of different forms of bankruptcy such as chapter 11 bankruptcy and the more common chapter 7 bankruptcy. Since chapter 7 bankruptcy is more common for individuals, it is important that a detailed explanation of what chapter 7 bankruptcy actually is.
The Definition Of Chapter 7 Bankruptcy
According to the law and the United States court system, Chapter 7 bankruptcy refers to liquidation of assets that are not legally exempt from liquidation in order to pay off creditors and debtors. Chapter 7 is an option open to individuals, businesses, partnerships and corporations. There is, however, a special clause open to the individual within the framework of this chapter filing that is not available to the other entities. That special clause is known as a discharge.What a discharge refers to is the freeing of the individual from certain debts.
Filing Chapter 7 Bankruptcy
On a baseline level, those filing for Chapter 7 must provide copies of tax returns; executed contracts and leases that have been expired; financial affairs statements; proof of assets and liabilities; and copies/schedules of current expenditures and income. For individuals there are additional items that must be provided to the court as well. These items include copies of credit counseling reports and repayment plan programs, employer payments and statements of income, interest payments on student loans, etc.
This is, of course, a brief overview and more detailed information is provided by the government and federal courts at the website uscourts.gov. However, trying to figure out Chapter 7 protection by yourself is not advised and it would be far more prudent to seek the advice of a legal professional as well.
If a businesses files Chapter 7 bankruptcy, then the business must cease to operate. A trustee is appointed immediately to manage the bankrupt business. The bankruptcy trustee will start to sell all of the businesses assets. The chapter 7 bankruptcy trustee will disburse any funds that are obtained from the sales of the assets to creditors.
When a company files Chapter 7 bankruptcy, it does not mean that all of the employees will lose their jobs. When a large companies or corporation goes into Chapter 7 bankruptcy they are usually bought by other companies and corporations and the employees are often unaffected.
In regard to individuals who file Chapter 7 bankruptcy, the individuals are allowed to keep some of their property. This property is exempt from being sold to payback debt.
Chapter 7 bankruptcy exempt property varies from state to state. There are some debts which individuals cannot file bankruptcy on. These include child support, student loans, fines imposed by a court and taxes.
Bankruptcy (whether business or individual) should be avoided if possible, it is no longer a easy way to escape your debts. You should know that just because you want to file a Chapter 7 bankruptcy, you might not be granted permission to do so.
The bankruptcy court will evaluate your situation and may decide that you can only file a Chapter 13 bankruptcy. This means that you will be obligated to pay back your debt within a certain time period. If you see a bankruptcy specialist and they advise you that you will be made to file Chapter 13, you should work hard to pay back your debts on your own without having a bankruptcy added to your credit report.
Both Jon Pow & Ken Charnley are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Jon Pow has sinced written about articles on various topics from Chapter 13 Bankruptcy, Chapter 7 Bankruptcy and College Student Loan. Jim pow is a write for the free lawyer advice website if you have more questions about bankruptcy please visit. Jon Pow's top article generates over 5400 views. to your Favourites.
Ken Charnley has sinced written about articles on various topics from Chapter 13 Bankruptcy, Cooking Tips and Bankruptcy Law. Ken Charnley is a personal finance publisher whose website is dedica. Ken Charnley's top article generates over 1000000 views. to your Favourites.