What is Chapter 7 bankruptcy? Chapter 7 is one of two types of personal bankruptcy filings. It’s also called “liquidation bankruptcy” because the court liquidates (sells) your assets to pay off your lenders and creditors. This allows you to complete your filing quickly, so you can get a fresh start faster.

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.