In detail
Chapter 7 Bankruptcy is a legal proceeding under the United States Bankruptcy Code. It is often called a liquidation bankruptcy. A person or business filing under this chapter asks a federal bankruptcy court for relief from debts. A court-appointed trustee reviews the filer's assets. The trustee may sell non-exempt property and distribute the proceeds to creditors. In exchange, the court may grant a discharge that releases the filer from personal liability for certain debts. Not all debts are dischargeable; some, such as certain taxes or student loans, may survive the bankruptcy. When a Chapter 7 Bankruptcy is filed, it becomes a matter of public record. The national credit reporting companies may include this public record on a consumer's credit reports. The Fair Credit Reporting Act governs how long such information may be reported. The presence of a bankruptcy on a credit report is a factual notation. It does not by itself change a credit score, though credit scoring models may consider public records when calculating a score. The reporting of a bankruptcy differs from the reporting of individual accounts, which may also show balances or payment histories. Chapter 7 Bankruptcy is distinct from Chapter 13 Bankruptcy. Chapter 13 involves a repayment plan and does not typically require liquidation of assets. Both are forms of bankruptcy relief. A bankruptcy filing is a legal process with long-term consequences, not a routine financial transaction. The FCRA allows credit reporting companies to include bankruptcies for a set period, and consumers may dispute inaccuracies under that law.