Chapter 7 is often called a liquidation bankruptcy. It is commonly used by individuals who want to walk away from their debts or businesses that want to terminate their operations and sell off their assets.
When a debtor files chapter 7, the bankruptcy court appoints a person to administer the estate. That person is called the trustee. In return for having debts discharged, the debtor must turn over to the bankruptcy trustee all property except for certain assets deemed exempt under Florida law. The trustee sells the property and distributes the proceeds to creditors according to priorities established by law.
The principal advantage of a chapter 7 proceeding is that the debtor emerges from bankruptcy without any future obligation s on his or her discharged debts.
Typically, there are five stages in a chapter 7 proceeding. They are:
- Getting the debtor into bankruptcy court
- Collecting the debtor’s property.
- Selling the property
- Distributing the proceeds of the sale to creditors
- Determining whether the debtor is discharged from further liability to these creditors
