Bankruptcy is a legal process for people who are unable to repay their debts. With the court's help, debtors try to work out an equitable solution that satisfies all parties. There are several types of bankruptcy, but the most common is known as liquidation bankruptcy, or "chapter 7." This refers to Chapter 7 of Title 11 of the United States Code, the section that governs this bankruptcy process. If you aren’t sure what chapter 7 bankruptcy entails or whether it’s appropriate for your situation, the guide below will serve as an introduction to the topic.

A Brief Guide to Chapter 7 Bankruptcy

What is Chapter 7 Bankruptcy?

The purpose of any form of bankruptcy is to discharge debts and allow the debtor to have a fresh start. However, the rights of the creditor must also be considered. Therefore, in liquidation bankruptcy, the debtor must liquidate any non-exempt assets — such as artwork, secondary vehicles, or non-primary residences — and direct the proceeds towards their debt. They may keep assets necessary for everyday life, such as a primary vehicle, their residence, digital equipment, and other equipment needed for work. 

What Are the Pros and Cons of Chapter 7?

Under the chapter 7 process, debts should be fully discharged after three to four months. This is much quicker than the alternative chapter 11 process, which often takes years. It gets creditors off your back quickly while letting you keep many of your essential possessions. However, it does require you to liquidate everything non-essential. Chapter 11, which takes considerably longer, allows you to pay off debt without having to sell your things. Note that neither chapter 7 nor chapter 11 bankruptcy provides relief from alimony, child support, student debt, or back taxes.

If you’re wondering whether you should declare chapter 7 bankruptcy, contact Upstate Legal Center of John V Shepard in Rochester, NY, for help. They have served Rochester and Monroe counties for more than 30 years. They also offer services in estate planning, personal injury, and criminal law cases. Visit their website to learn more about their legal services or call (585) 429-5422 to speak with an attorney about your case.