Chapter 7 business bankruptcy is an existing type of bankruptcy whereby a business or corporation declares that it is unable to pay off all debts owed to all of its creditors. It is designed to both protect the debtor, by helping them to start over again, and to help the creditors secure as much of the money that is owed to them as possible.
Chapter 7 Process
When a business owner comes to the conclusion that he/she must declare bankruptcy, he/she must file with the local bankruptcy court. In doing so, they must include documentation, including assets and liabilities, current income and expenditures, a statement of financial affairs, and all contracts and unexpired leases. With this information, if the business owner’s situation passes a chapter 7 means test and appropriate chapter 7 bankruptcy rules, he/she may file chapter 7 bankruptcy.
Means Test for Ch 7
At the beginning of a case, all attempts by creditors to collect from the debtor are immediately halted. Then, a meeting will be scheduled between a court-appointed trustee, the debtor, and the creditors. During this meeting, the creditors may question the debtor on the debts that he/she owes them. Following this, the trustee will determine if this case passes the chapter 7 means test. This may include determining whether the debt in the case at hand exceeds the chapter 7 debt limit, and other factors. If it passes the means test, then the case will precede. If not, it must be reevaluated.
Bankruptcy Asset Liquidation
Once the debtor’s assets are accounted for, the task of the trustee is to liquidate them in such a fashion so as to get as much money as possible for the creditors. When all of the assets are liquidated, the case will be discharged. That is to say, the creditors may no longer seek further payments from the debtor.
Chapter 7: Advantage and Disadvantage
The advantage to filing under chapter 7 protection is that it protects the debtor from creditors. However, the disadvantage is that his/her credit rating (and future business opportunities) will be marred by the fact that he/she had filed bankruptcy under chapter 7.
Chapter 7 Bankruptcy Lawyer Help
If you are in debt and believe that you might qualify for chapter 7 protection, you should consult a bankruptcy attorney. They are professionals who can provide quality, sound legal advice. Depending upon your case, it may turn out that you need not file for protection at all. However, the best way to determine this is to seek legal counsel.
