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 North Carolina, 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 bankruptcy trustee is appointed to oversee the sale of the debtor's nonexempt property. The proceeds from the sale are then distributed to creditors according to the rules set out in the Bankruptcy Code. It's important to note that while Chapter 7 can eliminate many types of debt, the debtor may still lose some of their property if it is not covered by exemption laws. North Carolina has its own set of exemptions that may differ from federal bankruptcy exemptions, and debtors can choose which set of exemptions to use. Liens and mortgages on the debtor's property may also affect what assets can be liquidated. Debtors considering Chapter 7 should be aware of the potential for property loss and may benefit from consulting with an attorney to understand the implications for their specific situation.