A Chapter 7 is also known as a liquidation bankruptcy. It is called that because the debtor’s non-exempt assets are liquidated and those proceeds are divided amongst the debtor’s creditors. Not to fear, however, because usually the debtor keeps most, if not all of his or her assets. That is because usually, with the exception of any secured assets, most of the debtor’s assets will be exempt from the actual liquidation.
Upon filing a Chapter 7 bankruptcy petition with the court, the court issues an automatic stay. This protects the debtor and his or her assets from creditors. The automatic stay also prevents any creditors from contacting the debtor to collect a debt. A few weeks after the bankruptcy petition is filed, the debtor attends a “Meeting of the Creditors” with his or her lawyer. The actual meeting only lasts a few minutes.
Finally, typically after just 2 more months, the court will order a discharge of the debtor’s debts, wiping the slate clean of the debtor’s unsecured debts. Then the case is closed.
For more information on whether a Chapter 7 is right for you, contact attorney Richard Komisars for your free consultation at (619) 888-8272.