Chapter 7 Bankruptcy

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CHAPTER 7-QUICKEST KIND OF BANKRUPTCY

Chapter 7- Quickest bankruptcy: Chapter 7 of the bankruptcy code is used only when the corporation sees no hope of being able to operate successfully or to obtain the necessary creditor agreement. Most cases filed in the United States are Chapter 7 sell out or liquidation cases, which is the simplest, swift types of bankruptcy. In each Chapter 7 case, a trustee is appointed to gather all nonexempt assets, sell them, and distribute the proceeds according to the priority scheme prescribed by the code. The trustee is a fiduciary for all creditors and is charged with maximizing value for estate creditors. Part of the trustee’s fiduciary duty is fulfilled by rooting around for free assets to distribute.

Chapter 7 cases: Chapter 7 is available 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 easiest case of all. There typically are no issues. The corporation is not entitled to exemptions because it will be dissolved or remain in limbo as an empty shell. For this reason, it does not get a discharge. Thus, the two most litigated issues in an individual Chapter 7 case, exemptions and discharge ability, are not an issue in a corporate Chapter 7 case.

Chapter 7 liquidation: Individual files the vast majority of Chapter 7 cases in the United States. In these cases, the debtor turns over all nonexempt assets to a bankruptcy trustee who sells them and distributes them to creditors according to the priority scheme. Although these cases are sell out 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 situation 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 common 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 rise. The purpose of a Chapter 7 bankruptcy is to accomplish a fair distribution of a debtor’s nonexempt property to creditors. Unsecured debts are fully discharged, unless they are voluntarily reaffirmed. Under Chapter 7 of the bankruptcy code, a debtor can get fresh financial start and start rebuilding credit immediately after discharge.

Security Interests in chapter 7 bankruptcy: If a creditor has a security interest in your property, the debt on that property can be discharged in a Chapter 7 bankruptcy. However, the security interest (the lien) does not disappear, so the creditor can repossess the property. The easiest way to deal with a creditor’s 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.