The Chapter 7 is the simplest form of bankruptcy. The court shall assign a “trustee”. This person (or entity) will have the duty to liquidate your business assets as best they can to satisfy as much of your creditor’s claims as possible.
The very first step is that you are required to go through a sort of ‘training’ or ‘counseling’ with an approved credit counseling entity. This process will force you to go through the nitty-gritty of your numbers and begin considering whether bankruptcy is truly the best option for you.
Should you wish to continue, the courts will need certification that you have completed the credit counseling process. At this point there will be flat fees charged by the courts to begin the bankruptcy process. Then you will have attorney fees to consider. There are a multitude of forms and documents that your attorney can help you fill out.
These forms and documents are your initial declarations of property you think is exempt from the hands of your creditors, along with the assets you have. You must be honest in these documents, as there are a lot of negative consequences that will befall those who are discovered to have omitted or lied.
At this point, you place control of your assets and information into the hands of the bankruptcy court.
All your property is now in play at the bankruptcy court. The Trustee is assigned. One thing to note, is the Trustee mainly operates for the benefit of your creditors. Obviously, they operate in your interest in the sense that they must follow rules fairly and objectively to give you fair bankruptcy process; however, their goal is to remit as much as they can back to the creditors. The creditors will, after all, be forced to accept significant losses in your bankruptcy.
To reflect this, there is an economic benefit for trustees. They are often paid a percentage of recovered assets.
There will then be a series of events and meetings in which you will physically be present and questioned about your prepared paperwork by the trustee. Creditors may even be present and have the opportunity to question you, although this is far less common. Typically, the creditors will rely on the trustee to do the job.
Finally, you will be required to go through an additional training on the topic of managing your finances. The US Trustee will often give you a short list of training courses for which you can choose from.
Eventually, a Notice of Discharge will be filed with court, and you have a certain amount of time (a few months) to wait after the notice. At that point, you have finished the bankruptcy process, and either most or all of the business debt has been discharged.