Kentucky residents who are considering filing for Chapter 7 bankruptcy may have questions about what it involves. Chapter 7 is also known as a liquidation. Unlike in Chapter 13, which involves a repayment plan, certain property and assets of the debtor are sold by the trustee in order to pay a portion of the owed debt. Although debtors may expect to lose some property, there are many categories of property that are exempted under both federal and state law so debtors will not lose everything.
The bankruptcy process begins with the filing of a petition. Additionally, the debtor will be required to file a statement of financial affairs along with a number of schedules that include information about the debtor’s assets and debts, income and expenses and any executory contracts or leases to which the debtor is a party.
Upon filing all of the required paperwork and either paying the filing fees or gaining approval for fee waivers, a trustee will be appointed, who will then schedule a meeting of creditors approximately 21 to 40 days after filing. At the meeting, creditors are allowed to object and to question the debtor under oath. If the bankruptcy is approved, the assets will then be liquidated and most remaining debts will be discharged. Chapter 7 halts all collection activity, and once a debt is discharged the creditor may not attempt to collect on it in any way.
Chapter 7 may not be for everyone, but it can be a good option for those people who are dealing with unmanageable unsecured debt such as medical debt or credit card debt. Through bankruptcy, people may be able to obtain relief from their debts while also being able to effectively start over financially. People with questions may benefit by speaking with a bankruptcy attorney.
Source: United States Court , “Liquidation Under the Bankruptcy Code“, November 24, 2014