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about Chapter 7 bankruptcy?
Chapter 7 bankruptcy, also known as liquidation in bankruptcy
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
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