What is Chapter 7?

Chapter 7 is a bankruptcy proceeding in which the filing entity goes out of business and liquidates its assets. The court appoints a trustee to liquidate the assets of the business, which are then used to pay secured creditors, followed by unsecured creditors. After all assets have been used to pay off creditors, the remaining obligations are discharged.

Both businesses and individuals can declare Chapter 7 bankruptcy. An individual filing for Chapter 7 bankruptcy can have most debts discharged by the court, though alimony, child support, and certain taxes and student loans will survive the bankruptcy and remain obligations of the individual.