Define: Liquidation Bankruptcy

Liquidation bankruptcy, also known as Chapter 7 bankruptcy, is a legal process where a debtor’s assets are sold to repay their debts. It is typically used by individuals or businesses who are unable to meet their financial obligations.

In liquidation bankruptcy, a trustee is appointed to oversee the sale of the debtor’s non-exempt assets. The proceeds from the sale are then distributed among the creditors to repay the debts. Any remaining debts that cannot be repaid are typically discharged.

Individuals, partnerships, and businesses can file for liquidation bankruptcy. However, there are certain eligibility requirements, such as passing the means test, which assesses the debtor’s income and expenses to determine if they qualify for Chapter 7 bankruptcy.

In liquidation bankruptcy, the debtor’s non-exempt assets are sold to repay the creditors. However, certain assets may be exempt from liquidation, such as a primary residence, personal belongings, and retirement accounts, depending on the applicable state or federal laws.

No, you will not lose everything in liquidation bankruptcy. Certain assets, such as exempt property, are protected from liquidation. Additionally, some debts, such as student loans and child support, may not be dischargeable.

Whether you can keep your house in liquidation bankruptcy depends on various factors, including the equity in your home and the applicable state or federal exemption laws. If you are current on your mortgage payments and the equity in your home is within the allowed exemption limits, you may be able to keep your house.

The duration of liquidation bankruptcy varies depending on the complexity of the case and the court’s caseload. Generally, the process takes around three to six months from the filing of the bankruptcy petition to the discharge of debts.

Yes, once you file for liquidation bankruptcy, an automatic stay goes into effect, which prohibits creditors from pursuing collection efforts, including phone calls, lawsuits, wage garnishments, and repossessions. This provides immediate relief from creditor harassment.

Yes, you can file for liquidation bankruptcy multiple times. However, there are certain time limits between filings, depending on whether you received a discharge in your previous bankruptcy case. These time limits range from two to eight years.

Yes, liquidation bankruptcy will have a negative impact on your credit score. It will remain on your credit report for up to ten years, making it difficult to obtain credit or loans at favorable terms. However, with responsible financial management, you can begin rebuilding your credit over time.