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 Delaware, as in other states, Chapter 7 of the Bankruptcy Code is designed for individuals or businesses seeking to discharge their debts through liquidation of 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 court-appointed trustee is responsible for selling the debtor's nonexempt property to pay off creditors. The Bankruptcy Code does provide for certain exemptions, allowing the debtor to retain some property deemed necessary for a basic standard of living. However, assets that are not covered by these exemptions can be sold, and secured debts, such as those with liens or mortgages, may lead to the foreclosure or repossession of the property if the debtor cannot make payments. It's important for individuals considering Chapter 7 bankruptcy in Delaware to understand that while it can provide relief from many types of debts, it may also result in the loss of some of their property.