Chapter 7 Background
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.
Accordingly, potential debtors should realize that the filing of a petition
under chapter 7 may result in the loss of property.