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 Indiana, 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 bankruptcy, 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. Certain property of the debtor may be protected by liens or mortgages, meaning that these assets are secured by creditors and are not available for liquidation by the trustee. The Bankruptcy Code also provides a list of exemptions that allow the debtor to retain some property for personal and financial rehabilitation post-bankruptcy. However, debtors should be aware that filing for Chapter 7 can lead to the loss of property if it is not covered by exemptions. Indiana has its own set of exemptions that may differ from federal bankruptcy exemptions, and debtors in Indiana can choose which set of exemptions to use.