Chapter 7, Title 11, United States Code

Section of United States federal statute Chapter 7 of Title 11 U.S. Code is the bankruptcy code that governs the process of liquidation under the bankruptcy laws of the United States. This is in contrast to bankruptcy under Chapter 11 and Chapter 13, which govern the process of reorganization of a debtor. Chapter 7 bankruptcy is the most common form of bankruptcy in the US. For businesses When a financially troubled business is unable to pay creditors, the business may file (or be compelled by creditors to file) for bankruptcy in a federal court under Chapter 7, which means that the business ceases operations unless those operations are continued by the Chapter 7 trustee. In a Chapter 7 bankruptcy, the trustee is appointed almost immediately, with broad powers to examine the finances of the business in bankruptcy; generally, the trustee sells the assets and distributes the money to the creditors. The investors who took the least amount of risk prior to the bankruptcy are generally paid first. For example, secured creditors will have taken less risk, because the credit that they will have extended is usually backed by collateral, such as assets of the debtor company. Fully secured c