In the United States, Chapter 7 bankruptcy is the most common type of bankruptcy filed. It is the liquidation process.
When an individual files for bankruptcy, they are often allowed to keep certain exempt property, such as real estate mortgages. Other non-exempt assets are then used for liquidation to pay creditors. Other types of exemptions that are common include child support, taxes, student loans, etc.
One downside to filing for personal bankruptcy is that it will stay on your credit report for ten years. This obviously makes applying for new credit less favorable, although there are too many factors involved to say that conclusively.
Businesses can also file for Chapter 7 bankruptcy, which means the business intends to sell all of its assets and distribute the proceeds to its creditors, before ceasing operations. This sometimes means employees will lose their jobs, but sometimes entire sections of the company are sold intact to other companies.
In 2003, there were 1,156,284 Chapter 7 bankruptcy filings by individuals and 21,008 filings by businesses. According to the Administrative Office of the US Courts, bankruptcy cases filed in 2004 fell 2.6 percent.
Filing bankruptcy can be one of the most important financial decisions one can make. It is always best to have someone who has experience and knowledge of bankruptcy law to help you through the process. Contact an experienced bankruptcy attorney today.