Chapter 7 bankruptcies, also called “straight bankruptcies,” are the most common form chosen by individual consumers. In a Chapter 7 consumer bankruptcy, the individual debtor’s estate is liquidated and the assets are distributed to creditors.
Partnerships, sole proprietorships and corporations are also eligible to file under Chapter 7. However, unlike individuals, these business entities are not eligible to receive a discharge. 11 U.S.C. ï¿½727(a)(1). Chapter 7 business liquidations are conducted in significantly the same manner as Chapter 7 consumer bankruptcies ï¿½ many of the business’s assets are sold and the proceeds are divided among the company’s creditors. Partnerships or corporations that wish to keep doing business may decide that Chapter 7 is not the best option because after liquidation and distribution, the business ceases to exist.