Bankruptcy Chapter 7, What it States

When you file for bankruptcy, you give yourself a chance to redeem yourself from financial problems. A chapter 7 bankruptcy is good way to start afresh financially and eliminates your debt problems faster. It is also known as liquidation or straight bankruptcy, which is the sale of a debtor's nonexempt assets and then the earnings are distributed to the creditors. What the debtor is allowed to keep is known as exempt property which is determined by the state law. This bankruptcy option is normally used in cases where the debtor has no property to lose.

Chapter 7 bankruptcy is the most common alternative amongst debtors. This is because it is one of the quickest ways the debtor gets to clear his debts. To file for this type of bankruptcy, you are required to file a petition plus other forms which you then file with the bankruptcy court in your region. When you fill in the forms you are required to describe your assets, your recent income and expenses, what you owe, assets that you state you are allowed to keep by law, property that you owned and money spent in the two previous years and additionally, property that you sold or gave out in the last two years.

When you file for a Chapter 7 bankruptcy, an appointed trustee collects all your no-exempt property and sells your assets. Proceeds from this are then distributed among your creditors. The debtor receives freedom from all dischargeable debts.

An added advantage when you file for Chapter 7 bankruptcy is that the "Order of relief" is put into effect. Informally known as the automatic stay, this immediately stops your creditors from coming after your assets or cutting off your utility services.