Chapter Seven Bankruptcy is Also Referred To As a Liquidation

Written by Adam Peck Category: Nursing Homes January 23rd, 2013 2 min read

Chapter 7 Bankruptcy is also referred to as liquidation under bankruptcy. Under this type of liquidation, the debtor’s property is sold and its proceeds distributed to his creditors. In this manner, the debtor is able to walk away freely, without any debt but without the vast majority, if any, of his assets.

QUALIFYING FOR CHAPTER 7

In order to qualify for a Chapter 7 bankruptcy, the reasons for the debt to be liquidated must not be deemed as abusive; this fact is the most important determinant of a debtor’s qualification for Chapter 7. Whether or not debt is abusive is determined through a “means test” whereby the debtor’s monthly income is compared to the state median and his debt is compared to the same.

APPLYING FOR CHAPTER 7

When applying for a Chapter 7 bankruptcy, in addition to a variety of fees – both filing fees and administrative fees – there are a variety of documents required. These documents include the following: a detailed list of all the debtor’s assets, the source and amount of his income, the particulars of his monthly expenses, and a comprehensive list of his debts, debtors, and the nature of their claims.

THE FUNCTION OF CHAPTER 7

Chapter 7 allows that the debtor should keep some of his property, particularly that which is excluded under federal bankruptcy law or the bankruptcy laws of his home state. As each set of exclusions may operate differently from one another, the debtor has the right to choose whether he will follow the state of federal exclusions pertinent to his case. A Chapter 7 bankruptcy is unique in that it forestalls an action by creditors or collection agencies. Immediately upon the filing of a Chapter 7 application, notice of the same is provided to the debtor’s creditors.

ALTERNATIVES TO CHAPTER 7

Depending on the particulars of the debtor’s case, alternatives to Chapter 7 may be considered. For those who have businesses, a Chapter 11 bankruptcy may be considered. In this case, an adjustment of debts is sought; either the time for repayment is extended or the amount of debt is reduced sufficiently to allow the debtor to repay the debt. Should the debtor have regular income, be it through a sole proprietorship or a long-held job or otherwise secure position, he may have the option to file a Chapter 13 bankruptcy, which would allow the debtor to avoid foreclosure on his home.

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Written by Adam Peck

Expertise: Personal Injury

Adam J. Peck, ESQ is a principal with Peck Law Group, APC. In 2008, Mr. Adam Peck received his Juris Doctorate from Whittier Law School where he graduated Cum Laude. His practice is primarily dedicated to representing Elders, Dependent Adults, along with their loved ones and family members, who have suffered horrific personal injuries.