A filing under Chapter 7 refers to or called as liquidation or straight bankruptcy and is the most common type of bankruptcy proceeding in the United States. With reference to chapter 7, a debtor is allowed to exempt (or keep) all or a certain portion of his or her property if he is filing for bankruptcy under this chapter. In most cases seen under the chapter 7, the debtor keeps all property. However, as each person and the situation is differ, the actual amount that can be retained that is the exempted amount, by a specific debtor is determined by the market value of the debtor’s property in terms of dollars. In the same manner, the type of the property owned by the debtor for instance, a retirement account, and/or the manner in which the property is owned by the debtor for instance, whether the property is owned individually by the debtor or jointly by the debtor and a spouse.
Generally the property that a debtor is allowed to keep is called exempt property and property that the debtor is not entitled to keep is termed as non-exempt property. A trustee, precisely called the Chapter 7 Trustee, is appointed by the bankruptcy court to collect the non-exempt property of the debtor, sell it, and distribute the sale proceeds to creditors. However, the vast majority of Chapter 7 bankruptcies are no-asset bankruptcies, meaning such cases in which the debtor is allowed to keep all of his or her property and nothing is distributed to creditors by means of selling it off.
The most important qualifying fact in determining your eligibility for filing a Chapter 7 Bankruptcy is to summarize whether your monthly income exceeds your monthly expenses. If such is the case then you may have too much of a disposable income to remain in Chapter 7.
For those who seriously consider filing a Chapter 7 bankruptcy, eligibility is usually not a problem. However with the new Bankruptcy law that became effective on October 17, 2005, made significant changes governing an individual’s eligibility to file for Chapter 7 Bankruptcy relief.