Chapter 7 Bankruptcy Law When you file for Chapter 7 bankruptcy, also known as liquidation bankruptcy, a bankruptcy trustee will gather your assets (outside certain exemptions) and sell them off to pay your debts to the extent possible. Once the debts are discharged, you can no longer be held personally liable for them.

A Chapter 7 case is a liquidation bankruptcy. Debtors who have non-exempt equity in property may lose that property in a Chapter 7 vs. Chapter 11 case. Most Chapter 7 cases filed by individuals are no-asset cases. No-asset cases mean the debtors keep all assets, but get rid of substantial debts.

Chapter 7 is considered a liquidation bankruptcy: it doesn't require a repayment plan but the business has to sell some assets to pay creditors.