Chapter 7 refers to a type of bankruptcy available to businesses or individuals that are in extreme amounts of debt. If they are without a means to pay what they owe or service their debts, a business owner or person may choose to file a Chapter 7 bankruptcy. They may also be forced to file this chapter by their creditors in certain situations.
Filing for a Business
When filing a Chapter 7 for a business it means ceasing all daily operations and closing down any productions or manufacturing. A Chapter 7 trustee or bankruptcy administrator becomes involved in order to assess the situation. The trustee is appointed very quickly and is given the authority to gather information and thoroughly examine anything that has to do with the business’ financial operations. Typically this results in complete liquidation of all of the business’ various assets. The proceeds from this liquidation are distributed among the business’ creditors. This means the loss of employment for those employed by the business filing. In certain cases, a company or part of a company may be sold to buyer as part of the liquidation process. Those proceeds are then distributed to pay back debts. This sometimes allows for some or all employees to keep their jobs.
Fully secured creditors are paid first. This means that the collateral held by a mortgage company or collateralize bond holder is greater than or equal to the amount they lent to the owner of the business. These debts cannot be diminished by filing a Chapter 7 because fully secured creditors have a legal right to the property offered up as collateral by the owner or a sum of money equal to the collateral offered.
Filing as an Individual
When filing a Chapter 7 as an individual, also known as a “straight bankruptcy” or “liquidation bankruptcy” there are certain property liquidation exemptions. The type and value of the property that can be deemed exempt varies from state to state. Therefore it is best to consult with a Richmond Bankruptcy Attorney. If there are any other assets that do not receive state sanctioned exemption, they are liquidated by the interim trustee and the funds are distributed to creditors, as with a business liquidation. Filing a Chapter 7 allows for any unsecured debts to be discharged. Some of the debts that are unable to be affected by a Chapter 7 are child support, spousal support, and unpaid taxes. Even though these types of debt are not subject to discharge, they are required to be listed on the schedule when filing.
Once the bankruptcy is filed, it remains on an individual’s record for 10 years from the date in which it was filed. For more information on this proccess visit https://fishersandlerlaw.com/bankruptcy-attorney-richmond-va/. Having a bankruptcy on record can hurt a person’s chances to receive credit and/or make the terms of any available credit extremely unfavorable. However, a substantial amount of debt may make credit far less available and much harder to get than a bankruptcy. A person’s creditworthiness is based on and determined by a number of factors.