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 Pennsylvania, 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, 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 the creditors. It's important to note that not all of the debtor's property can be sold; the Bankruptcy Code provides a list of exemptions that protect certain types of property from being liquidated, such as a portion of the equity in the debtor's home, automobile, personal belongings, and retirement accounts, among others. The specific exemptions that a debtor can claim may vary based on state law. In Pennsylvania, debtors can choose between the federal exemption list and the state's exemption list. Liens and mortgages on the debtor's property may also affect the liquidation process, as secured creditors have a right to repossess or foreclose on secured property. Filing for Chapter 7 bankruptcy can result in the loss of property, but it can also provide a fresh start for individuals overwhelmed by debt. Debtors considering Chapter 7 should consult with an attorney to understand the implications for their personal situation and to navigate the complexities of the bankruptcy process.