Chapter 7 is designed as an orderly, court-supervised procedure by which a trustee collects the non-exempt assets of the Debtor’s estate, reduces them to cash, and makes distributions to creditors, subject to the debtor’s right to retain certain exempt property and the rights of secured creditors. Because there is usually little or no nonexempt property in most Chapter 7 cases, there may not be an actual liquidation of the Debtor’s assets. These cases are called “no-asset cases.”
A creditor holding an unsecured claim will get a distribution from the bankruptcy estate only if the case is an asset case and the creditor files a proof of claim with the bankruptcy court. In most chapter 7 cases, the Debtor receives a discharge that releases the debtor from personal liability for certain dischargeable debts. The Debtor normally receives a discharge three to four months after the petition is filed.
In order to determine the possible availability of any assets the Trustee will review your schedules. They will also ask you questions under oath at a required meeting to ensure that you have accurately listed all of your assets and all of your liabilities. All debtors must attend this meeting, and they will be accompanied by their attorney.
Individuals, as well as corporations, may file a Chapter 7.