Chapter 7 Background

A Chapter 7 bankruptcy does not require the filing of a plan of repayment as in Chapter 13. Instead, the bankruptcy trustee gathers and sells the debtor’s nonexempt assets and uses the proceeds of such assets to pay creditors.

Part of the debtor’s property may be subject to liens and mortgages that pledge the property to other creditors.

 Chapter 7 will allow the debtor to keep certain “exempt” property; but a trustee will liquidate the debtor’s remaining assets. Accordingly, potential debtors should realize that the filing of a petition under chapter 7 may result in the loss of property.