Chapter 7 is often referred to as liquidation bankruptcy. Chapter 7 cases result in the immediate end of any legal proceedings against you to take money or other kinds of property including your home away from you. A trustee is appointed from a panel of trustees. The trustee’s job is to read the petition and schedules and ask the debtor questions under oath about property, debts and other financial issues. This usually occurs at a courthouse or in some other governmental office. The debtor must attend this important meeting.

The trustee has a duty to sell the debtor’s nonexempt property and to pay creditors in a specific order of priority required in the Bankruptcy Code.

Since exempt property may vary from state to state the debtor or person preparing the bankruptcy petition and schedules must know what law applies in order to preserve the most property for the person desiring a fresh start in life. ‘Exempt property’ is property a debtor gets to keep to help get a fresh start in life. Under the Bankruptcy Code, each state has the right to opt out of the generous federal exemptions and to add their own. For example, New Jersey goes by the federal exemption system. New York does not. The state legislature in New York has ‘opted out’ of the federal bankruptcy exemptions and enacted its own. This is why it is important to speak to a lawyer who is familiar with the bankruptcy process. The federal exemptions are described in this web site. Be sure your home state has not changed to another list of exemptions for property.

The filing of any voluntary bankruptcy petition results in the automatic stay being imposed. Creditors are prohibited by federal law from taking any action to collect money or take property such as cars or homes away from the debtor. They must ask the bankruptcy judge for permission to resume any action except in very limited circumstances. They must prove their legal right to do so.

A Chapter 7 debtor receives a discharge of all debts except for those which are not typically discharged under the Bankruptcy Code. The discharge is mailed to the debtor 60 days after the debtor meets with the trustee.