Business, Legal & Accounting Glossary
The most familiar type of bankruptcy, in which many or all of your debts are wiped out completely in exchange for giving up your nonexempt property. Chapter 7 bankruptcy takes from three to six months, costs about $200, and commonly requires only one trip to the courthouse.
Chapter 7 is a section of the US Bankruptcy Code under which a company or an individual can declare bankruptcy. A Chapter 7 bankruptcy is also known as a liquidation bankruptcy. Once a Chapter 7 filing is made, the US Bankruptcy Court appoints a trustee. With a Chapter 7 bankruptcy, the trustee takes an inventory of all non-exempt assets and liquidates them. The proceeds are then used to repay eligible creditors of the Chapter 7 bankrupt party. Chapter 7 creditors are ranked according to the credit risk they took – the lower the risk, the higher the likelihood of being repaid. In accordance with the absolute priority rule, under a Chapter 7 bankruptcy, shareholders are paid after creditors. With a Chapter 7 bankruptcy, a company will need to stop all business activities and turn over its assets. Once the Chapter 7 bankruptcy proceeding is completed, the individual or the company will be relieved of all debt obligations and will be able to start anew. In 2005, Chapter 7 was significantly changed with the enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act which made it much more difficult to be eligible to file bankruptcy under Chapter 7.
To help you cite our definitions in your bibliography, here is the proper citation layout for the three major formatting styles, with all of the relevant information filled in.
Definitions for Chapter 7 are sourced/syndicated and enhanced from:
This glossary post was last updated: 26th November, 2021 | 0 Views.