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Chapter 7 is designed as an orderly, court-supervised procedure
by which a trustee collects
the assets of the debtor’s estate, reduces them to cash, and makes distributions
to creditors, subject to the debtor’s right to retain certain exempt property
and the rights of secured creditors. (Visit your state bankruptcy page listed
below to
learn
your specific exemptions.) Because
there
is
usually
little
or
no
nonexempt property in most chapter 7 cases, there may not be an actual liquidation
of the
debtor’s assets. These
cases are called “no-asset cases.” Usually a debtors with assets
that they wish to keep and that are not covered by exemptions file chapter
13
bankruptcy.
A creditor holding an unsecured
claim will get a distribution from the bankruptcy estate only if the case is
an asset case and the creditor files a proof of claim with the bankruptcy court.
In most chapter 7 cases, the debtor receives a discharge that releases the
debtor from personal liability for certain dischargeable
debts. The debtor normally
receives a discharge three to four
months after the petition is filed.
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