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Chapter 7

What is Chapter 7
A chapter 7 debtor may be an individual, a partnership or a corporation or other business entity. Chapter 7 does not involve the filing of a plan of repayment as in chapter 13 and is sometimes referred to as "straight bankruptcy". Instead, a trustee is appointed in the case and sells the debtor’s nonexempt assets and uses the proceeds to pay the creditors of the debtor. The Bankruptcy Code will allow the debtor to keep certain “exempt” property, but the trustee will liquidate the debtor’s remaining assets. Chapter 7 debtors should realize that the filing of chapter 7 may result in the loss of property.
Chapter 7 is used by individuals to free themselves of debt and is used by businesses to liquidate and terminate their business. One of the primary purposes of straight bankruptcy is to discharge certain debts to give the debtor a “fresh start”. However, a discharge is only available to individual debtors, not to partnerships or corporations.
If the debtor’s current monthly income is more than the state median, the Bankruptcy Code requires application of a "means test" to determine whether the chapter 7 filing is presumptively abusive. The debtor may rebut a presumption of abuse by showing of special circumstances that justify additional expenses or adjustments of current monthly income.
Individual debtors must file a Certificate of Credit Counseling and a copy of any debt repayment plan developed through credit counseling.
Individual debtors must also complete a Financial Management Course before they are eligible for a discharge.