10/13/2021
Navigating a bankruptcy can be confusing and frustrating. Here are some Chapter 7 Bankruptcy Basics:
Debtors who are looking to liquidate their debts file a Chapter 7 bankruptcy case. Trustees in these cases are granted control over the debtor's assets and determine whether selling the debtor's assets as equity will offset their debts. Once the selling of the assets is complete, funds are allocated to creditors. This case is also known as an "asset case." If there are no assets to allocate, and all aspects of the bankruptcy are met, a discharge is granted.
Both individuals and businesses can file a Chapter 7 bankruptcy. In these cases, it is typical that debtors have minimal amounts of assets to liquidate. If debtors have significant assets they do not wish to liquidate, they will file for a Chapter 13 or Chapter 11 bankruptcy and create a plan to pay off creditors over time.
In 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) created the means test to detect whether a debtor qualifies for a Chapter 7 bankruptcy case. If applicable, the Chapter 7 petition for relief is submitted, and an automatic stay is established, ceasing creditors from continuing to garnish wages, place calls requesting payments, and initiate or continue lawsuits. Creditors can file a motion to lift the automatic stay. Following filing, the appointed trustee holds a 341 meeting, where they ask debtors questions regarding their assets. The trustee will determine the state of the petitioner's equity and liquidate any necessary possessions or report no assets. Once the case settles, a discharge order is set in place, relieving debtors of any debt collections to which creditors can object. A business that files for Chapter 7 bankruptcy does not receive a discharge.
Curious to see if a Chapter 7 bankruptcy is right for you? Call our office at (209) 476-1010 and schedule your free consultation today!
