Chapter 7 – Straight Liquidation
Chapter 7 is a straight liquidation bankruptcy and is designed to give the debtor (the person or business entity filing for bankruptcy relief) the most complete and expeditious debt relief. A Chapter 7 liquidation is also available for closing down businesses. Basically, in a Chapter 7 case, an individual client gives up the value of their non-exempt assets in exchange for getting discharged (or relieved) of all of their debt. However, there are many rules and limitations that the client must be aware of in order to successfully navigate the Chapter 7 system. First of all, the client should fully understand what does and what does not constitute an exempt or non-exempt asset. Additionally, in order to even qualify to file a Chapter 7 case, the client must be able to pass a “means test”. This test is designed to qualify a client to file a Chapter 7 case only if their income, for a stated family size, in a certain geographical location, is equal to or less than a pre-determined amount. Our staff can help you determine if you, as a client considering bankruptcy, must comply with the Chapter 7 means test and if so, if you can successfully “pass” this requirement. In addition to determining your eligibility to file a Chapter 7 case our office can explain the complexities to be encountered during the Chapter 7 process so that nothing comes as a surprise and you are fully aware of the potential exposures and benefits of a Chapter 7 filing as it applies to your unique circumstances.
A company filing chapter 7 is liquidated by a trustee appointed in the case. The funds derived from the liquidation are used to pay the company's creditors. Sometimes placing a company in Chapter 7 triggers personal liability if some of the company debts were personally guaranteed.