What is Chapter 7 Bankruptcy?

Chapter 7 is the liquidation provision of the bankruptcy code and is sometimes referred to as “straight bankruptcy.” Under chapter 7, the assets of the debtor are collected and sold and the proceeds are distributed to the creditors. The debtor is allowed to keep some property which is exempt under the Bankruptcy Code or the laws in the state in which the debtor resides. However, anything that is not exempt will be used to satisfy the claims of creditors. With this said, the substantial majority of cases are cases in which the debtor is able to exempt all of his or her assets under the code leaving creditors nothing. This is known as a “no asset” case. Once the debtor gives up all non-exempt property, the debtor is granted a discharge from most of the debts that are remaining.