Chapter 7 Bankruptcy: Straight Bankruptcy

December 22, 2011 by  Filed under: Bankruptcy 

Chapter 7- Quickest Type of Personal Bankruptcy

Chapter 7 of the bankruptcy code is utilized only when the corporation-or individual-sees no possibilities of being capable to operate within financial success or to obtain the plausable creditor agreement. Most individual cases filed in the United States are Chapter 7 sell out or liquidation cases, which is the simplest,most common code of bankruptcy. In each Chapter 7 case, a trustee is designated to gather all nonexempt capital, sell them, and allocate the proceeds according to the precedence scheme prescribed by the code. The trustee is a fiduciary for all creditors and is entrusted with maximizing value for estate creditors. Part of the trustees fiduciary duty is fulfilled by rooting around for free assets to apportion.

Chapter 7 Cases:

Chapter 7 is applicable to individuals as well as legal entities like corporations and limited liability companies (LLCs). A corporation or LLC filing a chapter 7 case is the simplest task of all. There typically are no issues. The corporation is not entitled to impunity because it will be dissolved or remain in limbo as an empty vessel. For this reason, it does not get liberation. Thus, the two most litigated issues in an individual Chapter 7 case, exemptions and discharge ability, are not at issue in a corporate Chapter 7 case.

Chapter 7-Liquidation:

Individuals-private citizens- file the vast majority of Chapter 7 bankruptcy cases in the United States. In these cases, the debtor turns over all nonexempt assets to a bankruptcy trustee who sells them and disperse them to creditors according to the prerogative scheme. Although these cases are sell outs or liquidation cases, typically the debtor has no nonexempt assets. Therefore there is no sell out or liquidation. Thus, despite the sell out or liquidation classification, in such a capacity nothing is sold and the debtor loses no property. That’s why these are often called no asset cases.

The Chapter 7 Advantage:

Chapter 7 bankruptcy (also known as straight bankruptcy or liquidation bankruptcy) is the most conventional choice for filing personal bankruptcy in the United State. Over a million Chapter 7 cases have been filed in the United States over the last year, and the numbers continue to surge. The aspiration of a Chapter 7 bankruptcy is to achieve a fair dispersion of a debtors nonexempt property to creditors. Unsecured debts are fully unshackled, unless they are voluntarily reaffirmed. Under Chapter 7 of the bankruptcy code, a debtor can get a gleaming financial lease on life, and start rebuilding credit immediately after discharge.

Security Interests in Chapter 7 Bankruptcy:

If a creditor has a security interest on your property, the debt on that property can be discharged in a Chapter 7 bankruptcy. However, the security interest (the lien) does not dissipate, so the creditor can repossess the property. The easiest way to deal with a creditors security interest is to allow the repossession, or better yet, you can surrender the property to the creditor, if the collateral is something you can live without.

If you want to keep the property, you have three choices for dealing with the debt. They are redemption, reaffirmation, and continuing to make the payments.

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