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Chapter 7 Bankruptcy – The Liquidation

Debt-forgivenessChapter 7, also known as a liquidation bankruptcy, is a proceeding that is available to most businesses and qualified individuals. It is often an attractive option because it offers immediate relief and can quickly relieve the debtor of the obligation to repay most types of debts.

 

Debtors commence a Chapter 7 proceeding by filing a petition that discloses all assets and identifies all debts. In theory, a court-appointed trustee collects and sells all of the debtor’s non-exempt assets and distributes the proceeds to the debtor’s creditors. In practice, many chapter 7 cases are filed by individual debtors and are “no asset” cases. This means the debtor receives a discharge without surrendering any assets because there are either no assets or the assets are protected from creditors by state and/or federal law.

 

Because no asset cases are so prevalent in Chapter 7 filings, Congress enacted the Bankrutpcy Abuse Prevention and Consumer Protection Act (“BAPCPA”) in 2005 to limit individual Chapter 7 filings to those who have no means to repay their debts. BAPCPA also prevented the discharge of certain types of debts that Congress specially classified for public policy reasons.

 

To determine if you qualify for Chapter 7 or whether it is the best way to resolve your debts, please complete the Bankruptcy Intake Form and contact our office for a free consultation.

 

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