Redwood City Bankruptcy: A Look at Chapter 7

Chapter 7 of the Title 11 of the United States Code governs the process of liquidation under the bankruptcy laws of the United States. Liquidation means that everything individuals own at the time of filing becomes the United State Trustee’s property to sell and pay off creditors. When a person files a Chapter 7, he is filing a petition asking the court to discharge his debts in exchange for giving up his property, except for “exempt “ property, which the law allows him to keep. A discharge prohibits creditors from collecting certain debts, which means that whatever debt is discharged does not need to be paid back.

To file a Chapter 7, individuals need to file a petition with the court, take two instructional courses, pay a fee, and appear at a hearing. For companies, they go completely out of business.  The petition generally includes the certificate of successfully completing the first instructional course, lists of assets, debts, personal and financial history, intent with respect to secured property, monthly income and expenses, etc. After the petition is filed, the court schedules a hearing, called the “341 hearing”. In the meeting, creditors question the individual filing under Chapter 7, but they usually never come to the hearing. The hearing is also an opportunity for the local trustee (an attorney from the community experienced in bankruptcy who is given the authority to oversee your case) to confirm the filer’s identity and to ask questions to determine if there are any other items listed which was not include in the paperwork. After waiting for the notice of the discharge, the case concludes and a fresh start begins.

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