Chapter 7 Bankruptcy: What It Is, How It Works, Ramifications

What Is Chapter 7? Bankruptcy is a serious business, so you need to understand it clearly. Chapter 7 ofTitle 11 in the U.S. bankruptcy codecontrols the process of asset liquidation.A bankruptcy trustee is appointed to liquidate nonexempt assets to pay creditors; after the proceeds are exhausted, the remaining debt is discharged. There are eligibility requirements to file Chapter 7, such as the debtor must have had no Chapter 7 bankruptcy discharged in the preceding eight years and the applicant must pass a means test. This process is also known as “straight” or “liquidation” bankruptcy.Key TakeawaysChapter 7 bankruptcy allows liquidation of assets to pay creditors.Unsecured priority debt is paid first in a Chapter 7, after which comes secured debt and then nonpriority unsecured debt.Filing Chapter 7 typically involves completing forms and a review of assets by the trustee. Understanding Chapter 7 Bankruptcy In Chapter 7 bankruptcy, the absolute priority rule stipulates the order in w...