In Chapter 7 bankruptcy, the debtor turns over assets to the referee for distribution to creditors, and any unsatisfied portion of the debt is legally cancelled. What else describes this process?

In Chapter 7 bankruptcy, the debtor turns over assets to the referee for distribution to creditors, and any unsatisfied portion of the debt is legally cancelled. What else describes this process?

• A. The debtor keeps all assets and debts are discharged immediately.
• B. The debtor's assets are turned over to the referee for distribution to creditors, and any unsatisfied portion of the debt is legally cancelled.
• C. The debtor's assets are sold by the creditors directly.
• D. The debtor's assets are held by the court until all debts are paid.

Answer: (B)

Chapter 7 is a liquidation and discharge process. In this track, the court appoints a trustee (historically called a referee) who gathers the debtor’s non-exempt assets, liquidates them, and uses the proceeds to pay creditors in a prescribed order. After the estate has been administered, most remaining debts are discharged, meaning the debtor is no longer personally liable for those obligations. Some property may be exempt and kept by the debtor, and certain debts cannot be discharged (like most taxes or alimony), but the essence is that assets are turned over for liquidation and the remaining eligible debts are canceled. This matches the described process precisely: assets are handed to the trustee for distribution to creditors, and the unsatisfied portion of the debt is legally cancelled.

Chapter 7 is a liquidation and discharge process. In this track, the court appoints a trustee (historically called a referee) who gathers the debtor’s non-exempt assets, liquidates them, and uses the proceeds to pay creditors in a prescribed order. After the estate has been administered, most remaining debts are discharged, meaning the debtor is no longer personally liable for those obligations. Some property may be exempt and kept by the debtor, and certain debts cannot be discharged (like most taxes or alimony), but the essence is that assets are turned over for liquidation and the remaining eligible debts are canceled. This matches the described process precisely: assets are handed to the trustee for distribution to creditors, and the unsatisfied portion of the debt is legally cancelled.