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 Vermont, as in other states, Chapter 7 bankruptcy is a legal process that allows individuals to discharge their debts by liquidating their nonexempt assets. When a debtor files for Chapter 7 bankruptcy, they are not required to submit a repayment plan as they would under Chapter 13 bankruptcy. Instead, a bankruptcy trustee is appointed to oversee the sale of the debtor's nonexempt property and distribute the proceeds to creditors in accordance with the Bankruptcy Code. Certain property is exempt from liquidation under Vermont state law and federal law, allowing the debtor to retain those assets. However, assets that are not exempt can be sold, and secured debts, such as those with liens or mortgages, may lead to the foreclosure or repossession of the property securing the debt. Debtors considering Chapter 7 should be aware that it can result in the loss of property, and they should consult with an attorney to understand the specific exemptions and legal implications.