Chapter 7 (Liquidation)

Chapter 7 of the U.S. Bankruptcy Code allows individuals or businesses to eliminate most debts through liquidation. In this process, a court appoints a trustee who sells the debtor's non-exempt assets to pay off creditors. Essential items such as a primary home, car, and necessary personal belongings might be protected. After the liquidation, most remaining unsecured debts, like credit card debt and medical bills, are discharged, freeing the debtor from the obligation to pay them. This chapter provides a fresh start financially but may impact credit ratings and future borrowing.