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What You Should Know About Chapter 7

Chapter 7 is designed as a court-supervised procedure by which a trustee collects the assets of the debtor's estate, reduces them to cash, and makes distributions to creditors, subject to the debtor's right to retain certain exempt property and the rights of secured creditors. You can visit your state bankruptcy page to learn your specific exemptions.

Typically, no Debtor' assets are collected in a Chapter 7 case. These cases are called "no-distribution" or "no-asset" cases. Usually debtors with assets that they wish to keep and that are not covered by exemptions file will file a Chapter 13 bankruptcy.

A creditor holding an unsecured claim will get a distribution from the bankruptcy estate only if the case is an asset case and the creditor files a proof of claim with the bankruptcy court. In Chapter 7 cases, the debtor receives a discharge that releases the debtor from personal liability for certain dischargeable debts. The debtor normally receives a discharge three to four months after the petition is filed.

Please see our Bankruptcy FAQ for more information on Chapter 7 Bankruptcy.

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