A qualified debtor may have debt discharged in exchange for giving up valuable nonexempt property for the trustee to sell to pay creditors.Even though the debtor will lose some property, there are several advantages of filing Chapter 7 bankruptcy over Chapter 13 bankruptcy.A particular advantage of chapter 13 is that it provides individual debtors with an opportunity to save their homes from foreclosure by allowing them to "catch up" past due payments through a payment plan. (2) The debtor may rebut a presumption of abuse only by a showing of special circumstances that justify additional expenses or adjustments of current monthly income. Instead, the bankruptcy trustee gathers and sells the debtor's nonexempt assets and uses the proceeds of such assets to pay holders of claims (creditors) in accordance with the provisions of the Bankruptcy Code. Moreover, the court may dismiss a chapter 7 case filed by an individual whose debts are primarily consumer rather than business debts if the court finds that the granting of relief would be an abuse of chapter 7. Unless the debtor overcomes the presumption of abuse, the case will generally be converted to chapter 13 (with the debtor's consent) or will be dismissed. Part of the debtor's property may be subject to liens and mortgages that pledge the property to other creditors. Subject to the means test described above for individual debtors, relief is available under chapter 7 irrespective of the amount of the debtor's debts or whether the debtor is solvent or insolvent. Such debtors should consider filing a petition under chapter 11 of the Bankruptcy Code. There are exceptions in emergency situations or where the U. trustee (or bankruptcy administrator) has determined that there are insufficient approved agencies to provide the required counseling. Although an individual chapter 7 case usually results in a discharge of debts, the right to a discharge is not absolute, and some types of debts are not discharged. Under chapter 11, the debtor may seek an adjustment of debts, either by reducing the debt or by extending the time for repayment, or may seek a more comprehensive reorganization. If a debt management plan is developed during required credit counseling, it must be filed with the court. Moreover, a bankruptcy discharge does not extinguish a lien on property. These lenders will seize the collateral and sell it—often at a significant discount, due to the short time frames involved.
Closing a business and liquidating assets can be a very complicated procedure subject to many laws and regulations.However, some types of debt are not dischargeable, including student loans (unless the court rules otherwise), child support and alimony, certain taxes, and debts incurred by fraud.Certain liens on property, such as a mortgage, a tax lien, or a mechanic's lien, remain after the completion of Chapter 7 bankruptcy. In general, the property a debtor acquires or will acquire after filing for Chapter 7 is not included in the bankruptcy estate.You should speak with an attorney or certified public accountant that specializes in business closures.While the process of closing a business is very difficult for many reasons, it is important to make sure you get the best value for your assets, pay your employees, satisfy your creditors, and comply with state and federal laws.