Individual Chapter 7 Bankruptcy Toolkit

Practical Law Toolkit w-022-9032 (Approx. 9 pages)

Individual Chapter 7 Bankruptcy Toolkit

by Practical Law Bankruptcy & Restructuring

Maintained • USA (National/Federal)

Resources designed to assist individual Chapter 7 debtors and their counsel in understanding and preparing a bankruptcy case under Chapter 7 of the Bankruptcy Code.

In an individual Chapter 7 bankruptcy case, a debtor is able to discharge most of its debts existing as of the petition date while retaining limited amounts of certain exempt property. The debtor's non-exempt assets are liquidated or reduced to cash by the Chapter 7 case trustee. To the extent available, the proceeds of the liquidation are used to pay the allowed amounts owed to creditors.

While individual debtors (with certain limitations) have the option to file for bankruptcy under Chapter 7, Chapter 11, or Chapter 13, they often choose to file under Chapter 7 because it is the least expensive and fastest option. While Chapter 7 is generally designed for individuals, corporations and certain other legal entities may also file for relief under Chapter 7. However, only an individual can receive a discharge under Chapter 7.

The primary goals of an individual Chapter 7 case are to:

Provide the debtor with a fresh start by discharging their debts that existed as of the petition date.
Reserve a limited amount of assets for the debtor (§ 522(d), Bankruptcy Code).
Provide for an orderly liquidation of the debtor's assets.
Provide creditors with an equitable distribution of the debtor's non-exempt assets according to the priorities created under the Bankruptcy Code (§ 726, Bankruptcy Code).

This Toolkit contains continuously maintained practice notes, standard documents, and checklists to help individual Chapter 7 debtors understand their restructuring and liquidation options.

Individual Chapter 7 Bankruptcy Toolkit | Practical Law