Encyclopedia of Investment Terminology

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Chapter 7

Chapter 7 of the United States Bankruptcy Code controls the liquidation process under bankruptcy. Business and individuals can file for Chapter 7 Bankruptcy in a Federal Court. Businesses that cannot repay its debt can file for chapter 7 or its creditors can file for it. The court will appoint a trustee that may or may not continue the business operations. The newly appointed trustee may liquidate all of the business’ assets and distribute the proceeds to creditors.

Under Chapter 7 bankruptcy filing, corporations or partnerships will not receive a bankruptcy discharge but individuals will.

Individuals may file for Chapter 7 bankruptcy and may be allowed to keep certain exempt property. The courts will discharge many unsecured debts but student loans, child support payments, income and property taxes will not be discharged.


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