Question
Bankruptcy is a legal process that allows people to wipe away some or all of their debt. Chapter 7 is one of the most common ways of declaring bankruptcy. If someone files for Chapter 7 bankruptcy, what happens to their debts? Choose 1 answer: A Most of their debts are eliminated. B Their debts are transferred to someone else. C Their debts are reduced , but not eliminated. D They have to pay all their debts in full.
Answer
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Ralph
Professional · Tutor for 6 years
Answer
(A) Most of their debts are eliminated.
Explanation
Chapter 7 bankruptcy is a legal process primarily aimed at helping individuals eliminate most of their unsecured debts, such as credit card debt and medical bills. When someone files for Chapter 7 bankruptcy, a trustee is appointed to oversee the liquidation of the filer’s non-exempt assets. The proceeds from this liquidation are then distributed to creditors. Although not all debts may be discharged (e.g., student loans, child support, and certain tax obligations), most unsecured debts are typically eliminated. Hence, the individual's responsibility to repay the majority of their debts is removed.