Chapter 7 Bankruptcy

Chapter 7 Bankruptcy is designed as an orderly, court-supervised procedure by which a trustee collects the assets of the debtor's estate, reduces them to cash, and makes distributions to creditors, subject to the debtor's right to retain certain exempt property and the rights of secured creditors. (Visit your states bankruptcy exemption page to learn about your states specific exemptions for filing bankruptcy).

Because there is usually little or no nonexempt property in most chapter 7 bankruptcy cases, there may not be an actual liquidation of the debtor's assets. These cases are called "no-asset cases." and are typical of most chapter 7 cases filed. If the debtor has substantial assets that they wish to keep and that are not covered by state or federal exemptions, may file a chapter 13 bankruptcy and retain 100% of all assets.

A creditor holding an unsecured claim will get a distribution from the bankruptcy estate only if the case is an asset case and the creditor files a proof of claim with the bankruptcy court. In most chapter 7 bankruptcy cases, the debtor receives a discharge that releases the debtor from personal liability for all dischargeable debts. The debtor normally receives a discharge three to four months after the petition is filed.

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