Which Chapter corresponds to liquidation?

Which Chapter corresponds to liquidation?

• A. Chapter 7 - Liquidation
• B. Chapter 11 - Re-Org Business
• C. Chapter 12 - Farmer/Fisher
• D. Chapter 13 - Re-Org Individual

Answer: (A)

Liquidation in bankruptcy means selling off a debtor’s non-exempt assets to pay creditors, with a trustee overseeing the process. Chapter 7 is the chapter designed for this purpose: after filing, a trustee liquidates what assets aren’t protected as exempt, then distributes the proceeds to creditors. After the liquidation, most remaining unsecured debts can be discharged, giving the debtor a fresh start. This is distinct from reorganization routes: Chapter 11 allows restructuring while continuing operations, Chapter 13 sets up a wage-earner repayment plan for individuals, and Chapter 12 is for family farmers or fishermen. So liquidation corresponds to Chapter 7.

Liquidation in bankruptcy means selling off a debtor’s non-exempt assets to pay creditors, with a trustee overseeing the process. Chapter 7 is the chapter designed for this purpose: after filing, a trustee liquidates what assets aren’t protected as exempt, then distributes the proceeds to creditors. After the liquidation, most remaining unsecured debts can be discharged, giving the debtor a fresh start. This is distinct from reorganization routes: Chapter 11 allows restructuring while continuing operations, Chapter 13 sets up a wage-earner repayment plan for individuals, and Chapter 12 is for family farmers or fishermen. So liquidation corresponds to Chapter 7.