Chapter 7 of the Bankruptcy Code provides for liquidation—the sale of the debtor’s nonexempt property and the distribution of the proceeds to creditors. A chapter 7 bankruptcy case does not involve the filing of a plan of repayment as in chapter 13.

Instead, the bankruptcy trustee gathers and sells the debtor's nonexempt assets and uses the proceeds of such assets to pay holders of claims (creditors) in accordance with the provisions of the Bankruptcy Code. Part of the debtor's property may be subject to liens and mortgages that pledge the property to other creditors.

In addition, the Bankruptcy Code will allow the debtor to keep certain "exempt" property; but a trustee will liquidate the debtor's remaining assets. Accordingly, potential debtors should realize that the filing of a petition under chapter 7 may result in the loss of property.

In Alaska, as in all states, Chapter 7 of the Bankruptcy Code allows individuals to discharge their debts through the liquidation of their nonexempt assets. When a debtor files for Chapter 7 bankruptcy, they are not required to submit a repayment plan as they would in a Chapter 13 bankruptcy. Instead, a bankruptcy trustee is appointed to sell the debtor's nonexempt property and distribute the proceeds to creditors. Certain assets may be protected by liens or mortgages, and these secured creditors have rights to the collateral securing their loans. The Bankruptcy Code also provides a list of exemptions that allow the debtor to retain certain types of property, such as a limited amount of equity in a home, automobile, personal belongings, and retirement accounts. The specific exemptions available may vary by state, and Alaska has its own set of exemptions that may differ from federal bankruptcy exemptions. Debtors in Alaska should be aware that filing for Chapter 7 bankruptcy could result in the loss of some of their property if it is not covered by exemptions.