Chapter 7 is available to individuals, corporations and LLCs.
Most people who file Chapter 7 bankruptcy do not lose any of their property.
The financial model of a Chapter 7 is similar to the financial model employed when someone dies; when someone dies all their property goes into a “decedent estate.” The estate has an officer called a personal representative. The personal representative pays the administrative expenses of the estate (such as burial, funeral , taxes, etc.) and distributes the remaining property to the heirs and devisees of the estate.
In a Chapter 7, all (with some exceptions) of the Debtor’s property legally goes into a “bankruptcy estate.” Instead of a personal representative, the U.S. Justice Department appoints a Case Trustee (also known simply as a Trustee). The Trustee seeks to recover property from the Debtor, pay the administrative expenses of the bankruptcy estate, liquidate recovered assets and distribute the funds to creditors.
In individual Chapter 7 the Debtor gets to “exempt” certain property. This means the Debtor gets to pull back property from the bankruptcy estate. In Michigan, Debtors can use the federal or the Michigan-specific exemptions. Usually, this results in the Trustee not being able to recover any assets.
Chapter 7 usually takes 100 – 120 days for the Debtor to receive a discharge. A discharge is a judicial order that your creditors may never collect on your debts ever again. There are five common exceptions from discharge in Chapter 7: income taxes less than 3 years old, debts incurred through fraud, domestic support obligations, domestic property and debt settlements/judgments and most student loans.
There are income limits on one’s ability to successfully get a discharge in Chapter 7.
If one received a discharge in a previous Chapter 7 one must wait 8 years from the previous case’s filing date to file another Chapter 7. If one received a previous discharge in Chapter 13 one must wait 6 years from the previous case’s filing date to file Chapter 7.
