Chapter 7 Bankruptcy: What Is It & How To File

Bankruptcy filing can be a complex process, but understanding the basics and knowing your options is key to making an informed decision. Chapter 7 bankruptcy, also known as liquidation bankruptcy, is one of the most common types of personal bankruptcy in the United States.

1. What is Chapter 7 Bankruptcy?:
• Bankruptcy is a federal court process that allows individuals to reorganize or eliminate their debts by creating a plan to pay back creditors within three to five years.
• Chapter 7 bankruptcy is typically used by individuals who have limited assets and income, as it offers a fresh start with minimal restrictions.
2. How Does Chapter 7 Bankruptcy Work?:
1. The process begins when the debtor files a petition for bankruptcy in federal court.
2. A trustee is appointed to manage the assets and pay back creditors as part of the plan.
3. Debtors can choose from two types of Chapter 7 plans: a discharge plan, which eliminates most debts, or a reorganization plan, which involves paying off debts over time.