What is chapter 7 bankruptcy?
A Chapter 7 is commonly referred to as a “liquidation” or “straight” bankruptcy. The purpose of chapter 7 is to permit the honest debtor to discharge most of his/her obligations to his/her creditors while retaining sufficient assets to obtain a “fresh start”. A trustee is appointed to facilitate both the discharge of the debtor’s debts as well as the liquidation of all property in excess of the amount deemed necessary under the Bankruptcy Code for the debtor’s “fresh start”. The property deemed necessary for the debtor’s “fresh start” is commonly referred to as “exempt property”. The bankruptcy trustee may only liquidate the debtor’s non-exempt property. In exchange, the debtor is granted a discharge, freeing him/her of most (if not all) of his/her debt. Most debtors, especially in Texas, own only exempt property resulting in the trustee taking nothing. Such cases are commonly referred to as “no asset” cases.