Chapter 7 bankruptcy processes may give you options for paying back your creditors when you no longer have a source of income or your debt far outpaces it. According to the United States Courts, both individuals and companies may file for this type of bankruptcy once certain requirements are met.
The decision to choose Chapter 7 bankruptcy may require you to learn more about its liquidation regulations and how these laws may affect your assets once you begin the process.
Chapter 7 preparations
One of the first steps to Chapter 7 bankruptcy is to file with your local court and provide it with a number of documents. These are mostly related to your current assets and income, including:
- A current income schedule
- A list of all assets and liabilities
- A summary of financial standing
Once these are accepted, the court will assign a third-party trustee to your case to hold the listed assets until liquidation takes place.
The duties of a trustee
Your bankruptcy trustee fills several roles once he or she becomes involved in your case. This individual will attend any legal meetings with your creditors, answer questions you may have about your assets and how the bankruptcy may affect your finances. He or she will also liquidate your assets when the time comes to repay your debts.
Once the filing is complete and you meet all legal requirements, the trustee will then liquidate your assets. He or she will sell any non-exempt property and then distribute that money among your creditors. There are several claims classes to meet, and each is repaid according to its place on the list.
Chapter 7 bankruptcy allows for several exemptions. Cooperating with your bankruptcy trustee can help you to better understand liquidation processes.