Chapter 7 bankruptcy is a liquidation proceeding.
The debtor turns over all non-exempt property to the bankruptcy trustee who then converts it to cash for distribution to the creditors. There are exemptions for different asset categories (we will discuss this when we meet) and, thus, the majority of Chapter 7 cases are “No Asset” cases.
The debtor receives a discharge of all dischargeable debts usually within four months. Because in the vast majority of cases the debtor has no non-exempt assets, a Chapter 7 will give that person a relatively quick “Fresh Start”. Benefits of a Chapter 7 filing begin the moment that the case is filed with a legal stay that immediately prevents creditors from taking any further action against the debtor.
One of the primary purposes of Bankruptcy Law is to give a person, who is hopelessly burdened with debt, a fresh start by eliminating their debt.