Chapter 7 Bankruptcy Explained

Also called a A "straight" or "liquidation" bankruptcy, Chapter 7 is designed to be an orderly, court-supervised procedure where a trustee collects all of the assets in the debtor's estate, converts them into cash, and in turn distributes it to the creditors, excluding the debtor�s exempted property and securing the rights of secured creditors. Because in most cases there is little or no non-exempt property, there might not be a liquidation of the assets of the debtor . These cases are reffered to as "no-asset cases". Most times a debtor with assets that he or she wishes to keep and that are not valid exemptions will file a Chapter 13 bankruptcy.

A creditor who's claim is unsecured will get a share of the distribution from the bankruptcy estate only if it is an asset case and has filed a proof of claim with the bankruptcy court. In most cases, the chapter 7 debtor gets a discharge which releases the him or her from personal liability on certain dischargeable debts. The debtor will normally receive the discharge three to four months after the petition for bankruptcy was filed.