What Is Chapter 7 Bankruptcy?

Chapter 7 Bankruptcy is a liquidation of the Debtor’s assets. When a Debtor files a Chapter 7 Bankruptcy, the Debtor must list all of the Debtor’s assets and liabilities. The Debtor chooses how to apply the exemptions to the Debtor’s property. If the Debtor has more assets than the exemptions will allow the Debtor to exempt, then the Debtor must decide which assets to leave un-exempt.

The administration of a Chapter 7 Bankruptcy in Sacramento involves liquidating the Debtor’s assets that are not exempt and administering the payment money received from the liquidation of the assets to the unsecured creditors. Although most Chapter 7 cases are no asset cases, some cases are asset cases. A no asset case is a case where there are no assets that are being liquidated, in other words all of the debtor’s assets are exempt. If there are assets, which are not exempt, then the case is an asset case. There are also no asset cases when there are assets that are not exempt. This happens when the assets are not valuable enough to realize a benefit to the unsecured creditors. This can also happen when the cost of liquidating an asset will leave little or no money left to distribute. Additionally when only a portion of an asset is not exempt, it may not be cost effective for the Trustee to sell the asset, pay the Debtor the exempt portion and then distribute the money to the unsecured creditors.

The fact that case is an asset case will not cause a delay in the discharge of the debtor. The Chapter 7 Trustee will cause the Bankruptcy Court to send a notice to file a claim to all the creditors in the case. If the asset is not cash, the Trustee will liquidate the asset and distribute the proceeds to the creditors according to the Bankruptcy Code.

Tags: , , , , , , , ,