Updated for the UK by the Practical Guidance Team.
Chapter 7 affords the debtor a fresh start following financial misfortune. This fresh start is different for an individual debtor and a business debtor in Chapter 7. Specifically, only an individual debtor can receive a discharge of its debts in a Chapter 7 case—there is no corresponding discharge for business debtors in a Chapter 7 case (see 11 U.S.C. § 727(a)(1); Fed. R. Bankr. P. 4004(c)(1)(A)). Business debtors obtain relief from their debts through dissolution (see Collier on bankruptcy P 727.01).
Unlike cases under other chapters of the Bankruptcy Code, in a Chapter 7 case, a trustee takes control of the debtor's assets, sells them, and distributes the sale proceeds to creditors according to the Bankruptcy Code's distribution scheme. Potential debtors must understand that filing for relief under Chapter 7 may result in the loss of their assets. Because of this process, Chapter 7 is titled ‘liquidation’.
This Practice Note addresses the following requirements for and issues common to Chapter 7 cases:
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Eligibility for Chapter 7
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