Chapter 7 Bankruptcy
Definition - What does Chapter 7 Bankruptcy mean?
Chapter 7 bankruptcy refers to the chapter of the bankruptcy code that provides for liquidation of the debtor's assets in order to pay debts. This process involves separating exempt from non-exempt assets, liquidating the latter, and using the proceeds to pay creditors. Not all Chapter 7 bankruptcies will have assets available for liquidation. The ultimate determination of what will or will not be liquidated belongs to the US Trustee. The US Trustee will follow the federal bankruptcy guidelines.
Chapter 7 bankruptcy is also referred to as straight bankruptcy or liquidation bankruptcy.
Justipedia explains Chapter 7 Bankruptcy
Chapter 7 bankruptcy is the most common form of bankruptcy filed in the United States. A trustee will cancel most of the filer's debts, but will typically liquidate some of the assets to distribute the proceeds to the debts. Liquidation involves the sale of the debtor's nonexempt assets and property and the use of the proceeds of to pay off debt and creditors.