Chapter 7 Bankruptcy
by Tracy L. Frink, O'Reilly Rancilio P.C.
A Chapter 7 bankruptcy lets one eliminate or discharge most of their debts in exchange for giving up property that is not protected by federal or state exemption laws. The court exercises its control through a court appointed person called a Trustee. The Trustee's primary duty is to see that the filer’s creditors are paid as much as possible on what is owed them. The Trustee will examine the paperwork that is filed to make sure they are complete and to look for nonexempt property to sell for the benefit of creditors. The Trustee will also look at any financial transactions made during the previous year to see if any can be undone to free up assets to distribute to creditors.
A creditor holding an unsecured claim will get a distribution from the bankruptcy estate only if the case is an asset case and the creditor files a proof of claim with the bankruptcy court. The Trustee will review the claims to make sure they are proper before making a distribution. The Trustee does have the authority to object to a claim that has been filed so as to maximize the distribution to all of the proper creditors. Any claims that have been disallowed or any creditor that did not timely file its claim will be discharged in the bankruptcy proceeding. The debtor normally receives a discharge three to four months after the petition is filed.