Chapter 7 Bankruptcy
If you find yourself or your business suffering from a difficult financial situation in which your debts are too high to manage, then you may want to consider filing for Chapter 7 bankruptcy. Under this financial plan, individuals or businesses utilize the services of a bankruptcy court to help them liquidize their non-exempt assets in order to obtain money to pay off creditors. Chapter 7 bankruptcy is the most widely-used form of bankruptcy in the United States. Approximately 1,117,771 people and businesses filed for this form of financial insolvency in 2008.
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About Liquidation
Individuals and businesses may select one of two options when deciding which bankruptcy path to take. They may choose to simply restructure and reorganize their payment plans in order to lower monthly fees to a more controllable rate. This form of bankruptcy is called Chapter 13 for individuals and Chapter 11 for businesses. The second option, utilized by both groups, is called Chapter 7. Under this type of financial resolution, the assets of either the individual or the company are liquidized - that is, sold in return for cash - in order to obtain the money needed to pay back creditors.
During the process of liquidation, a trustee is appointed by the bankruptcy court to organize and carry out the sale of one's assets. This person carries out the entire liquidation process, including deciding which assets are exempt and non-exempt, selling the exempt property and repaying the money owed to the debtor's creditors.
Exempt and Non-Exempt Assets
It is important that a party filing for Chapter 7 bankruptcy is made aware of the difference between exempt and non-exempt assets. Exempt assets are items that the debtor does not require for decent living purposes. They typically include second vehicles, second homes, family heirlooms, expensive collections of stamps or coins, or stocks and bonds. Non-exempt assets include property that is necessary for relatively comfortable living. Examples of non-exempt assets would be motor vehicles worth a certain amount ($1000, e.g.) or less, some furniture, some clothing, tools of one's profession, home appliances, and public funding such as social security or welfare.
Fees Associated with Chapter 7
Chapter 7 bankruptcy is not a free process. Filers must pay the filing fee, which is typically close to $300. Filers must also complete a number of legal forms and documentation before the procedures can begin.
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