Chapter 7


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Related to Chapter 7: Chapter 11

Chapter 7

In the United States, a type of bankruptcy where a person's or company's assets are required to be liquidated. The court appoints a trustee, who may or may not be a part of the company, to oversee the liquidation process. If a company files for chapter 7, it ceases operations. The company's creditors receive the proceeds from liquidation according to the system of absolute priority; that is, secured creditors are paid first, then if anything is left unsecured creditors are paid, then preferred stockholders, and finally common stockholders. A company files for chapter 7 proceedings when its management believes that reorganizing according to a court-mandated plan would not result in the company becoming profitable.

Chapter 7

A bankruptcy option in which a bankrupt firm is liquidated after the courts have determined that reorganization is not worthwhile. A trustee is charged with liquidating all assets and distributing the proceeds to satisfy claims in their order of priority. In Chapter 7 bankruptcies the creditors often receive a fraction of the value of their claims and the stockholders receive nothing.
References in periodicals archive ?
From the debtor's perspective, very broad exemptions make Chapter 7 attractive.
Businesses seeking bankruptcy protection can choose between Chapter 7 liquidation and reorganization under Chapter 11, which is designed to protect viable businesses facing temporary financial problems.
The debtor is not given a complete discharge of debts as in Chapter 7.
Surprisingly, debtors may prefer Chapter 13 to Chapter 7 despite having to repay a greater percentage of their debts.
Under both bills, debtors with sufficient income to repay a percentage of their unsecured debts would not receive the full discharge formerly available under Chapter 7 and would be required to pay part of their debts under a Chapter 13 repayment plan.
The Senate bill allows a Chapter 7 case to be converted to a Chapter 13 case if the debtor can repay at least 20% of unsecured debts.
Unless they are settled, all of these government priority claims survive either a Chapter 7 or a Chapter 13 bankruptcy.
A Chapter 13 plan is a payment plan that includes postbankruptcy filing date (postpetition) income earned, while a Chapter 7 bankruptcy is a liquidation process.
A Chapter 7 bankruptcy, however, does not discharge taxes due or penalties for tax years involving fraud or failure to file.
28) The Chapter 13 filing also suspends the periods for calculating the nondischargeable tax debts and late filed returns, should the debtor convert the Chapter 13 bankruptcy to a Chapter 7 bankruptcy liquidation.
Chapter 7 Bankruptcy -- Additional Exceptions to Discharge
Should the debtor fail to complete payments under the Chapter 13 plan or follow an unsuccessful Chapter 13 plan with a straight Chapter 7 liquidation, the debtor is burdened with additional exceptions to discharge of tax-related claims.
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