Chapter 7 Bankruptcy
Chapter 7 is the most common and frequently filed form of bankruptcy. It is available to individuals and businesses. In an individual chapter 7 case, the Debtor (person who is filing the case), seeks to receive a Discharge. The Discharge is the legal determination that the Debtor no longer has personal liability for paying his/her debts.
Some debts cannot be discharged in a chapter 7. These debts include most taxes, domestic support obligations, which include alimony and child support, student loans, liabilities resulting from an injury caused while operating a vehicle under the influence of drugs and/or alcohol and debts that are determined to be incurred as a result of fraudulent activity by the Debtor.
Corporations and other business entities may file a chapter 7 case, but they do not receive a Discharge. Instead, the business entity ceases operations. Individual Debtors in a bankruptcy case are allowed to protect, or exempt, certain property in their case. A chapter 7 case is frequently described as “liquidation.” In a chapter 7, a court-appointed trustee is charged with collecting and liquidating the debtor's nonexempt property (i. e. property that cannot be protected in the case), and the proceeds are disbursed to the creditors according to the priorities set by the bankruptcy code. In the case of a corporation, the Debtor cannot exempt any property. The Debtor’s assets are liquidated by the trustee, and the proceeds are disbursed to the creditors according to the priorities set by the bankruptcy code.