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 Indiana, Chapter 7 bankruptcy is a legal process that allows individuals to discharge their unsecured debts through the liquidation of their nonexempt assets. When a debtor files for Chapter 7, they are not required to submit a repayment plan as they would in a Chapter 13 bankruptcy. Instead, a court-appointed trustee sells the debtor's nonexempt property to pay off creditors. The Bankruptcy Code, which is federal law, provides a list of exemptions that protect certain types of property from being sold, allowing the debtor to retain those assets. However, 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 Indiana to understand that while it can eliminate many types of debt, it may also result in the loss of property if that property is not covered by state or federal exemptions.