How Does Chapter 7 Bankruptcy Work?

Written by Economic Development Jobs on June 30, 2018. Posted in Contract interpretation, Judge thomas e. scott, Mediator

Bankruptcy court is where individuals or entities go when they no longer have the assets to pay off their debts, or at least cannot do so in a timely way. When it comes to businesses, there are two options for walking into bankruptcy court: Chapter 11 and Chapter 7. Chapter 7 bankruptcy is by far the more common and involves liquidating the company, while Chapter 11 is primarily a form of reorganization.

Bankruptcy Court: Who is Involved?

When a company is unable to pay back creditors and things cannot be worked out, bankruptcy court is where everything will be settled. In a Chapter 7 case, a ruling judge presides over the bankruptcy court, while a representative from the Department of Justice also attends to keep things moving. There is also another trustee appointed to oversee the business’ liquidation. The company that files in bankruptcy court is the debtor, and there can be man