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 Virginia, 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 creditors. The Bankruptcy Code, which is federal law, determines which assets are exempt and nonexempt, but Virginia has its own set of exemptions that a debtor can choose instead of the federal exemptions. It is important for debtors to understand that while Chapter 7 can provide relief from many types of debts, it may also result in the loss of property if that property is not covered by exemptions. Liens and mortgages may still be enforced against exempt property, meaning that secured creditors may have rights to repossess or foreclose on the property securing a debt. Debtors considering Chapter 7 should consult with an attorney to understand the implications for their property and to navigate the complexities of the bankruptcy process.