What is “Liquidation Bankruptcy”?
Chapter 7 Bankruptcy, sometimes called “liquidation bankruptcy” or “straight bankruptcy” is generally the simplest and quickest form. Chapter 7 is available to individuals, married couples, corporations and partnerships. With this filing you turn over all of your non-exempt property to the trustee who then converts it to cash for distribution to your creditors. Most people have no assets to offer to pay off creditors; in this case, liquidation will give you a clean slate, in a relatively quick manner.
The main purpose of liquidation is to discharge certain debts, so that you can have a “fresh start.” You will have no personal liability for discharged debts after the filing and completion of your case. In a liquidation case, however, a discharge is available only to individual consumers, not to partnerships or corporations.
What Do I Need To Provide To File Chapter 7?
In order to complete and file for financial insolvency, you must provide the following information:
- A list and some background detail on all creditors (amount owed, date incurred)
- Information and detail regarding the filing, and your income.
- A list of all of your property.
- A detailed list of your monthly living expenses, i.e., food, clothing, shelter, utilities, taxes, transportation, medicine, etc.
- Driver License
- Social Security Card
- A Copy of Your Taxes From the Year Prior to Filing
- A Valid Certificate of Credit Counseling
Married individuals must provide some of this important information for their spouse regardless of whether they are filing as a joint petition, separate individual petitions, or if just one spouse is filing chapter 7. In a situation where only one spouse files, the income and expenses of the non-filing spouse is required so that the court, the trustee and creditors can evaluate the entire household’s financial circumstances.
What is the Process?
After you have filed for Chapter 7 an “automatic stay” is ordered which stops, collection actions against you, and your property. The automatic stay goes into effect right away, the moment you file, giving you immediate relief from creditors.
The stay is essentially a civil restraining order precluding creditors from taking any collection action without specific permission from the court. As long as the stay is in effect, creditors generally may not initiate or continue lawsuits, wage garnishments, or even telephone calls demanding payments. The clerk generally is the one to formally give notice to creditors by serving on them the Notice of Bankruptcy Filing.
About 30 days after the petition is filed, the trustee will conduct a “meeting of creditors.” You are required to attend this meeting and provide truthful answers to the trustee’s questions (and questions from creditors if applicable). During this meeting of creditors, the trustee will ask you questions about assets, liabilities, income, and expenses. Don’t let the name fool you though, it is very uncommon for any creditors to actually show up.
After the debtor has his or her meeting with the trustee, and the trustee is satisfied the information contained in the Chapter 7 is true and correct, the individual debtor becomes eligible for a discharge. A typical Chapter 7 takes a total of about six months from the initial filing to the discharge.
Benefits of Filing for Chapter 7
- Stop Creditor Harassment
- Start to Rebuild Your Credit
- Stop Garnishments
- Relatively Inexpensive
- Eliminate Repossession Debts
Let Us Help You Protect Your Property
McFarlin LLP has a great deal of experience with bankruptcy. We have represented thousands of clients and can offer you the best possible service at a reasonable price. We offer prospective clients a free consultation to discuss the filing process and answer any questions that you may have. Contact us today (888) 728 0044, or email us.