We have all heard of chapter 7 bankruptcy, although many of us if asked probably could not give a precise answer to what exactly it entails. Every day people make mistakes when filing for bankruptcy that probably could have been avoided if they had better understood the different types of bankruptcy.

Having to go through the proceedings necessary in bankruptcy is the last thing people want to do. However if their debts add up to more than what they have coming in sometimes this is unavoidable.

Numerous kinds of bankruptcy proceeding exist including but not limited to chapter 11 and chapter 7. In this article our focus is going to be on chapter 7 since this is more for individuals.

Defining chapter 7 bankruptcy for all

According to the law and the United States court system, Chapter 7 bankruptcy refers to liquidation of assets that are not legally exempt from liquidation in order to pay off creditors and debtors.

Businesses/partnerships/corporations and individuals can apply for a chapter 7 bankruptcy. It is also important to note that individuals do also have a special clause open solely to them.

The special clause for the public is called a discharge. What it basically means is that the public are able to free themselves totally from some of their debts.

The first things to do when filing chapter 7

Generally speaking to file a chapter 7 bankruptcy one mast supply the courts with copies of their tax returns, contracts of an executive nature, statements of financial affairs, all proof of liabilities and assets as well as documents to prove one’s current income and necessary expenses.

For individuals there are additional items that must be provided to the court as well. These items include copies of credit counseling reports and repayment plan programs, employer payments and statements of income, interest payments on student loans, etc.

The information in this document is very brief and general, if you need to find out more about chapter 7 bankruptcy and others, a good place to start would be with the links in this article and also with the US courts website. If you do file for bankruptcy make sure you get a good lawyer.