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 Virginia, Chapter 7 bankruptcy is a legal process that allows individuals to discharge their unsecured debts by liquidating 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 in Virginia, as in other states, certain assets are considered exempt and can be kept by the debtor. These exemptions include specific types and amounts of property, such as a portion of equity in a home, a vehicle up to a certain value, and personal belongings. However, nonexempt assets will be sold off, which could mean the debtor loses some property. Debtors considering Chapter 7 should be aware of the potential for asset loss and may want to consult with an attorney to understand the implications for their personal situation.