In short
Chapter 7 bankruptcy is a liquidation: a trustee collects and sells the debtor's nonexempt assets, distributes the proceeds to creditors by priority, and most remaining debts of an individual debtor are discharged.
Key takeaways
- Filing creates an automatic stay that stops most collection actions.
- Secured creditors are paid from their collateral; priority claims, such as certain taxes and wages, are paid before general unsecured claims.
- Some debts, such as most student loans, child support and certain taxes, are not discharged.
Where it's tested
REG: Debtor-Creditor & Bankruptcy — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
Which bankruptcy chapter provides for liquidation of the debtor's nonexempt assets by a trustee?