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Chapter 7 Bankruptcy is often referred to as a "straight"
bankruptcy or a "liquidation". In Chapter
7, any assets not considered exempt under the law
(see Section
2)are turned over to a bankruptcy trustee (or
administrator). He/she sells the property, and distributes
the money equally among the unsecured creditors.
In actual practice, however, very few people are
required to turn over any property to the trustee.
In exchange for turning over any property not considered
exempt under the law, the debtor is entitled to
a discharge of unsecured debts (with several exceptions--see
Section 3). On secured debts, the debtor either
reaffirms the debt (continues to make payments),
surrenders the property back to the creditor, or
redeems the property (making a lump sum payment
equivalent to the value of the merchandise).
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