Chapter 7 bankruptcy 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—and potential debtors should realize that the filing of a petition under Chapter 7 may result in the loss of property.

In Arizona, Chapter 7 bankruptcy is a legal process designed for individuals or businesses unable to repay their debts. It involves the liquidation of the debtor's nonexempt assets by a bankruptcy trustee. The trustee sells these assets and distributes the proceeds to the creditors. Chapter 7 does not require the debtor to file a repayment plan as is the case in Chapter 13 bankruptcy. Instead, it provides for a straightforward liquidation of assets. Arizona law, in conjunction with federal bankruptcy exemptions, determines which of the debtor's property is exempt from liquidation, meaning the debtor can keep certain assets. However, debtors should be aware that filing for Chapter 7 bankruptcy could lead to the loss of nonexempt property. Liens and mortgages on the debtor's property may also affect the distribution of assets to creditors. It's important for individuals considering this form of bankruptcy to understand both the federal Bankruptcy Code and the specific exemptions provided under Arizona law.