Chapter 7 of the Bankruptcy Code
is entitled “Liquidation” and is found in Title 11 of the United States Code. 11 U.S.C. §701, et. seq.
Table of contents for this topic:
Chapter 7 procedure
A Chapter 7 bankruptcy case begins with the filing of a petition. E.g.
, 11 USC 301
and Bankruptcy Rule 1002
(voluntary cases). The debtor then files financial disclosure documents and, a month or two after the case began, meets with the Chapter 7 trustee and any creditors who appear to answer questions.
The Chapter 7 bankruptcy involves two conceptually different activities:
debtors are seeking a discharge
. Creditors have approximately two months after the trustee meeting to request that a debtor not receive a discharge or that a particular obligations be excepted from the discharge.
Second, the trustee is seeking to recover and liquidate any substantial non-exempt
assets to create a bankruptcy estate from which to make a distribution to creditors.
The case is closed once:
- (a) the Court has (i) issued or denied a discharge and (2) made a ruling on any request for a determination regarding the dischargeability of any debts and
- (b) the trustee has either (i) determined that there are no assets for distribution or (ii) distributed any assets the trustee has recovered.
Thus, it is possible for a case to remain open for quite some time after either the debtor has a discharge (case remains open for trustee to administer assets) or the trustee has made a "no distribution" determination (case remains open for court to rule on a request that the debtor be denied a discharge or that a certain debt be excepted from the discharge).
Structure of Chapter 7
Chapter 7 is divided into five subchapters:
- I - Officers and Administration
- II - Collection, Liquidation, and Distribution of the Estate
- III - Stockbroker Liquidation
- iv - Commodity Broker Liquidation
- V - Clearing Bank Liquidation
See generally Bankruptcy Discharge
The Chapter 7 discharge is found at 11 USC 727
Main topic Bankruptcy Reaffirmation
A Chapter 7 debtor may formally "reaffirm" a debt and, thereby, except it from the general Chapter 7 discharge.