Chapter 7 of Title 11 in the U.S. bankruptcy code controls the process of asset liquidation. A bankruptcy trustee is appointed to liquidate nonexempt assets to pay creditors; after the proceeds are exhausted, the remaining debt is discharged.

Chapter 7 provides relief to debtors regardless of the amount of debts owed or whether a debtor is solvent or insolvent. A Chapter 7 Trustee is appointed to convert the debtor’s assets into cash for distribution among creditors.

Chapter 7 bankruptcy—also known as liquidation or straight bankruptcy —is a process where you can ask a bankruptcy court to wipe out most of your debts. This can help you start over. A judge will review your case and accept or deny the request.

"Chapter 7 is usually filed when there is no prospect of reorganizing and the only remaining option is to liquidate assets," says Van Horn.