Bankruptcy > Special Chapters

Chapter 7

Chapter 7 governs liquidation or straight bankruptcy cases and is the most common of all bankruptcy proceedings. This type of proceeding is available to individuals, partnerships, and corporations with the exception of railroads, insurance companies, and certain savings institutions. Filing of the petition may be voluntary (by debtor) or involuntary (by creditors). The date of the voluntary filing of the petition by the debtor is considered the equivalent of the date of the entry of the Order for Relief in an involuntary proceeding initiated by creditors. This is when the court acquires jurisdiction over the debtor’s property and may move to appoint a trustee. Title to all the debtor’s assets is transferred to the bankruptcy estate, and the debtor no longer has the ability to deal with the assets outside of the bankruptcy proceeding. Afterward certain assets may be exempted from sale or abandoned by the trustee under appropriate court order. Title to such exempt or abandoned property then revests in the debtor.


The debtor may not act as a debtor-in-possession under Chapter 7. The debtor’s estate, consisting of both real and personal property – with the exception of exempt or abandoned property – is liquidated (sold off) and the cash is then used to satisfy creditor’s claims.


A Discharge releases the debtor from all dischargeable debts arising prior to the commencement of the case which were properly listed in the debtor’s schedule and which are not excepted from discharge under 11 U.S.C. 523. Revocation of a Discharge may be granted, after due notice and hearing, by the court if it can be determined that such Order was obtained through fraud then unknown to the requesting party; if the debtor failed to report certain estate  property; or if the debtor refuses to obey lawful order or respond to material questions approved by the court. Such request for revocation must be made within one year following the discharge; or, if request is made for reason other than fraud, such request may be made one year from date of discharge or the date the case is closed, whichever is later.

Chapter 7: Underwriting Guidelines

From a title perspective, the entry of a Discharge releases the debtor from personal liability for

dischargeable debts and prohibits enforcement by creditors against the debtor for such debts. When insuring title to real property acquired by the debtor  after the commencement of his bankruptcy case, no scheduled debts (i.e., those disclosed of record) should be ignored unless the examined bankruptcy file shows that the period for request for revocation has expired (see above) and no order revoking the discharge has been granted.

Documents necessary to convey title in a Chapter 7 Bankruptcy


1.  Order of Abandonment, and

2.  Deed from bankruptcy trustee.


1.  Court Order approving sale and conveyance of the specific property, and

2.  Deed from bankruptcy  trustee.