What is Chapter 7 Bankruptcy?
This is the most common bankruptcy. Individuals and businesses may file chapter 7. Also known as “liquidation” bankruptcy, a Chapter 7 conceptually involves a liquidation of a debtor’s assets by a bankruptcy trustee for the benefit of creditors. Liquidation is the concept, but not necessarily the reality for the vast majority of Chapter 7 bankruptcies. If the bankruptcy trustee cannot find any assets with equity beyond a creditor’s lien and a debtor’s applicable exemption in such asset, the asset will not be liquidated. Thus, many chapter 7 bankruptcies result in a discharge of debts without loss of assets to the bankruptcy trustee.
After the trustee reviews the debtor’s bankruptcy petition and schedules to determine whether there are assets that may be liquidated, he/she issues a report (either there are assets available for distribution to creditors or no such assets) followed by entry of a discharge. some debts are excepted from discharge and misconduct during a bankruptcy case can be grounds for denial of discharge.