A Chapter 7 bankruptcy is a liquidation of all the debtor’s assets. Anything of value owned by the debtor is sold and the cash is distributed among the creditors. Some items, however, are exempt and cannot be sold. Chapter 7 bankruptcies are frequently referred to as “no asset” cases as most Chapter 7 debtors have nothing that can be sold off to pay creditors.
NOTE: Persons without a regular income will generally be required to file under Chapter 7 because a repayment plan under Chapter 13 would be impossible.
Chapter 7 bankruptcies do not include a repayment plan that the debtor must adhere to for many months. Once the assets are liquidated, the bankruptcy is granted, the debts are discharged and the proceedings are finished. A typical Chapter 7 case takes approximately 6 months from start to finish.
Chapter 7 bankruptcies make up the majority of individual bankruptcy filings. It is under Chapter 7 bankruptcies that state laws concerning exempt property and homestead exemptions become pivotal.