Chapter 7 bankruptcy law is also known as the liquidation law. It gives provision for the debtors properties to be sold and the proceeds shared among the creditors. In this case, it begins with a petition being filed by the debtor in the bankruptcy court. Together with the petition, he must submit the business income statement and the balance sheet. The latter documents will enable the court to decide if the debtor is suitable to file the petition.
Before the court can start the bankruptcy case, the individual must undergo counseling with an expert of financial management. This way, the debtor is in a better position to manage debts whether or not he comes out of the current situation. The court in the United States appoints a trustee, a private individual responsible of liquidating the debtors nonexempt assets. He is also responsible for selling off the property and sharing the proceeds among the debtors. In Alabama and Carolina states, a bankruptcy administrator is appointed. This is a court official who supervises and administers such financial cases.
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A chapter discharge may be issued to both the debtor and the creditor. This serves as a no go zone meaning that the property belongs neither to the debtor nor the creditor. This means that the debtor is not personally liable towards the debts. Again, the creditor will not be in a position to collect the debt directly from the debtor. This protects the debtor from harassment.
It is normally rare for the court to fail to grant the debtor a chapter discharge but it may do so in case the debtor fails to produce financial books of the past years of operation. The court may do so in case it finds out that the debtor fails to disclose financial crimes committed in the past.
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