Chapter 7 Bankruptcy: Who is it for?

In order to better understand a chapter 7 bankruptcy, the following background information may be helpful:

• The Bankruptcy Code is the informal name for title 11 of the United States Code.
• A debtor is a person who files a petition for relief under the Bankruptcy Code.
• A creditor is one to whom a debtor owes money or who claims to be owed money by the debtor.
• Exempt property is property owned by an individual debtor that the Bankruptcy Code or state law permits the debtor to keep from unsecured creditors.  For example, in Florida a debtor can exempt the equity in his primary residence (the so-called homestead exemption).
• An unsecured creditor holds no special assurance of payment, such as a mortgage or lien.  Credit was extended based solely upon the creditor’s assessment of the debtor’s future ability to pay.
• A lien is the right to take and hold or sell a debtor’s property as payment for a debt.