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 Maine, as in other states, Chapter 7 of the Bankruptcy Code is designed for debtors who are unable to repay their existing debts. Under Chapter 7, individuals can discharge most of their unsecured debts by liquidating their nonexempt assets through a bankruptcy trustee, who then distributes the proceeds to creditors. It's important to note that Chapter 7 does not involve a repayment plan like Chapter 13 bankruptcy does. Instead, it focuses on selling off nonexempt property to pay off debts. Maine law provides a list of exemptions that allow debtors to keep certain essential property, such as a portion of equity in their home, a vehicle up to a certain value, personal belongings, and tools of their trade, among others. However, assets that are not covered by these exemptions can be sold by the trustee. Debtors considering Chapter 7 should be aware that it may result in the loss of some of their property if it is not protected by state exemptions.