Chapter 7 is the provision most commonly
used by individuals. In a Chapter 7 Bankruptcy , a trustee is appointed
by the court, the current assets are counted up by the trustee who
pays debts to the extent possible with priority for taxes, then secured
debts, and finally unsecured debts. Then the court officially declares
the debtor bankrupt and discharges the un-payable debts, to the loss
of the creditors. Exempt from sale to pay debts are a portion of the
value of a home, secured notes that can be kept current, an automobile,
tools of the trade, furniture, and some other items. The concept is
to give someone a fresh start, but it has often led to careless, profligate
business operations and casual running up bills with those giving credit
being badly hurt by bankruptcies. Not dischargeable in bankruptcy are
alimony and child support, taxes, and fraudulent transactions. Filing
a bankruptcy petition automatically suspends all existing legal actions,
and is often used to forestall foreclosure or imposition of judgment.
After 45 or more days a creditor with a debt secured by real or personal
property can petition the court to have the "automatic stay" of legal
rights removed and a foreclosure to proceed. Upon official declaration
of bankruptcy a party cannot file for bankruptcy again for seven years.
