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How about Chapter 7 bankruptcy?

Chapter 7 bankruptcy, also known as liquidation in bankruptcy the code and often referred to as straight bankruptcy, is the most common type of bankruptcy. When people generically refer to bankruptcy, they are most likely referring to Chapter 7 bankruptcy. The purpose of Chapter 7 bankruptcy is to protect you the debtor from your creditors. 

When a person files Chapter 7, their goal is to wipe out most if not all of their debts. You file under Chapter 7 if your debts are largely unsecured or if you want to wipe out most of your debts and never repay them again. If your debts are mostly loans or credit cards and judgments, you would most likely want to file Chapter 7. Imagine that for six months or more you are suffering terribly under the heavy burden of debt and all of a sudden, all that load gets lifted off you and you are a free person.  One person likened it to being declared not guilty after a long trial without bail. That is what debtors report experiencing when they file Chapter 7 bankruptcy.

The laws governing Chapter 7 bankruptcy can be found in Chapter 7 of the bankruptcy code also know as Title 11 of the United States code. This chapter is divided into four subchapters. Subchapter 1 deals with the duties of the trustee as applied to a filing under Chapter 7, subsection II deals with collection, liquidation and distribution of the bankrupt estate, subchapter III deals with stockbroker liquidation and subchapter IV  deals with commodity broker liquidation.

Subchapter II (Section 721 through 728) is of particular importance to debtors because it deals with your right to operate a business while in bankruptcy, redemption of property, rights of partnerships, treatment of certain liens, disposition of property, the discharge of debts and certain tax provisions.

From the debtor's point of view, the goal is to obtain the discharge which is essentially a court order declaring all of ones dischargeable debts discharged. Any debts that are discharged are never ever repaid by the debtor or by anyone else. Legally, it is as if the debtor never owed the debt. You can file Chapter 7 no sooner than every six years, (seven years under the new bankruptcy laws) or more accurately, you cannot get a discharge any sooner than every six years. The ability to discharge ones debts every six (or seven years under the new law) is crucial to realization of personal liberty that is at the core of our democracy. It is also strikes a balance between the interests of big business (the lenders) and the individuals who collectively make up this country.

The process starts with the preparation and filing of the documents. After that, a trustee is appointed to administer the bankrupt estate and to ensure the smooth and equitable application of the law. Approximately four weeks after the commencement of the case, the debtor appears for the meeting of the creditors. If the debtor does not have non-exempt assets, the discharge is issued about four months after the commencement of the case.  If there are non-exempt assets the trustee is empowered by law to liquidate them and disburse the proceeds to the creditors.

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