With Chapter 7 bankruptcy, you will sell your (or your business’s) assets and pay your creditors using the proceeds of the sale. This option is different from Chapter 13 bankruptcy, which involves developing a plan to repay creditors and avoid foreclosure and other legal actions. Choosing Chapter 7 bankruptcy means liquidating your business.
Chapter 7 Bankruptcy Petition Process
First, the individual or business files a petition with the bankruptcy court in the correct jurisdiction with certain required documents. For businesses, these documents show:
- Assets and liabilities
- Current income and expenditures
- Statement of financial affairs
- Executory contracts and unexpired leases
- Certain tax records
Individuals have additional document filing requirements. These include:
- Credit counseling information
- Evidence of recent payment from employers
- Income information
- Record of any interest in federal or state education or tuition accounts
To complete the bankruptcy paperwork, the debtor must also provide:
- A list of all creditors and how much the debtor owes them
- Information about the debtor’s income
- A list of all of the debtor’s property
- A detailed list of the debtor’s monthly living expenses
There are also some filing and administrative fees that the court will collect. When completing the petition, the debtor may also note any “exempt” assets that will not be part of the sale to pay creditors.
After Filing Under Chapter 7
Filing for Chapter 7 bankruptcy will stop most collection actions against you, but possibly only for a short time.
Three to five weeks after the petition is filed, a case trustee will hold a meeting with you and your creditors to ask and answer questions. Within 10 days of the meeting, the trustee will report to the judge (who will not have been present at the meeting) regarding whether the petition may legally proceed.
Then, the trustee sells the debtor’s nonexempt property if it is free of or worth more than any liens or security attached to the property. If the debtor is a business, the court may allow the trustee to operate the business for a limited time if it will benefit creditors and better the sale of the assets.
Get Help When You Need It Most
If you’re considering Chapter 7 bankruptcy, contact the team at Bankruptcy Done Right™ first. Our team of attorneys, CPAs, and financial experts can help ensure you make the best decision possible for yourself and your business. Then, we can help you navigate the bankruptcy process with a customized, focused, and efficient approach. That way, you’ll get to the other side with as little hassle as possible.
Call 866-246-7690 or schedule a consultation online. There is no obligation when you speak with a member of our team. You’ll put your best foot forward with Bankruptcy Done Right™.