Purpose of Chapter 7 Bankruptcy

Most bankruptcy cases are filed under Chapter 7 (the so-called liquidation Chapter), pursuant to which the debtor’s nonexempt assets are sold and the proceeds paid to creditors.
In the majority of Chapter 7 cases, however, no dividends are actually paid to unsecured creditors because most debtors’ assets are fully encumbered, exempt or insufficient to pay anything other than a small fee to the Chapter 7 trustee. These are commonly referred to as “no asset” cases


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