Chapter 7 is a section of the U.S. Bankruptcy Code for liquidation.
In Chapter 7, a trustee typically:
collects and sells (liquidates) the debtor’s non-exempt assets, and
uses the proceeds to pay creditors in a priority order.
For individuals, Chapter 7 often results in a relatively quick discharge of many eligible debts; for businesses, it usually means the business shuts down and assets are liquidated rather than reorganized.
