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 Maryland, Chapter 7 bankruptcy is a legal process that allows individuals to discharge most of their debts through the liquidation of their nonexempt assets. When a debtor files for Chapter 7, a bankruptcy trustee is appointed to oversee the case. The trustee's role is to sell the debtor's nonexempt property and distribute the proceeds to creditors. It's important to note that not all assets are subject to liquidation; debtors are allowed to keep exempt property, which may include certain personal belongings, equity in a home, and tools of the debtor's trade, among other things. The specific exemptions that a debtor can claim are determined by Maryland state law, as well as federal law. Liens and mortgages on the debtor's property may also affect the liquidation process, as secured creditors have rights to the collateral securing their loans. Filing for Chapter 7 bankruptcy can lead to the discharge of many debts, but it may also result in the loss of property. Debtors in Maryland considering Chapter 7 should be aware of the potential consequences and may benefit from consulting with an attorney to understand their rights and the implications of filing for bankruptcy.