How does chapter 7 bankruptcy work and what are the pros and cons?
A petition for bankruptcy is filed in a bankruptcy court. If the court declares the individual or business bankrupt, there are three means of resolution available: liquidation, reorganization, and repayment. Chapter 7 of the Bankruptcy Reform Act concerns liquidation, the sale of assets of a bankrupt individual or business to pay its debts. In principle, the assets of the individual or business are sold to satisfy the claims of the creditors. The debtor is then relieved of all remaining debts….Chapter 7 also specifies the order in which claims are to be paid. First, creditors are allowed to repossess (or assume ownership of) the collateral for their claims. Then the remaining cash and assets–if any–are paid to unsecured creditors in the order prescribed by the bankruptcy act. (A37 of Appendix C–Business Law, Regulation, and Taxation. I’m not sure of the actual year, authors, or name of the text.
