What is a key characteristic of straight bankruptcy?

Straight bankruptcy, also known as Chapter 7 bankruptcy, primarily involves the liquidation of assets to pay off creditors. This process allows individuals or businesses to eliminate most of their debts while maintaining a fresh financial start. Upon filing for straight bankruptcy, a trustee is appointed to assess the debtor's assets. Non-exempt assets are sold, and the proceeds are distributed among creditors according to the priority established under bankruptcy law.

This option highlights the fundamental nature of straight bankruptcy, which distinctly differs from other types of bankruptcy, such as reorganization plans seen in Chapter 11 or Chapter 13 bankruptcies. Those alternatives focus on restructuring debts or negotiating terms with creditors to allow the debtor to retain more of their property while gradually repaying debts. In contrast, the aim of straight bankruptcy is to promptly settle debts through asset liquidation, making it a more immediate and often comprehensive solution for overwhelming debt situations.