Why do we call bankruptcy Chapter 7?

Very few people know why the type of personal bankruptcy that eliminates a persons debts is called CHAPTER 7.  Well, here’s the answer.  There is huge volume of books that contain all of the laws that our Federal Government passes.  Those books are called the United States Code.   That Code has TITLES, and within those TITLES are CHAPTERS.  TITLE 11 of the United States Code is all about bankruptcy, and is sometimes called by bankruptcy code.  Within TITLE 11 is Chapter 7, which is called  the “Liquidation” section of TITLE 11 of the United States Code.  Chapter 7 Liquidation means that in exchange for liquidating all of your property (with exemptions that usually means that you get to keep everything you own), you are permitted to discharge, or eliminate your unsecured debts in Chapter 7.  Chapter 13 and Chapter 11 are other Chapters of TITLE 11 of the United States Code, and they will be discussed elsewhere.
Click below if you would like to see all of Chapter 7 as actually written as law in the Code.
TITLE 11 > CHAPTER 7

CHAPTER 7—LIQUIDATION

  • SUBCHAPTER I—OFFICERS AND ADMINISTRATION (§§ 701—707)
  • SUBCHAPTER II—COLLECTION, LIQUIDATION, AND DISTRIBUTION OF THE ESTATE (§§ 721—728)
  • SUBCHAPTER III—STOCKBROKER LIQUIDATION (§§ 741—753)
  • SUBCHAPTER IV—COMMODITY BROKER LIQUIDATION (§§ 761—767)
  • SUBCHAPTER V—CLEARING BANK LIQUIDATION (§§ 781—784)