How does a Chapter 7 bankruptcy work?
In a Chapter 7 bankruptcy, a trustee is appointed by the bankruptcy court.
The trustee then has jurisdiction over the debtor and collects, or catalog, disposable property and then liquidates it, that is, converts it to money, most often by selling it, in order to pay off creditors. In steps, therefore, a Chapter 7 numbers five: jurisdiction, collection of assets, sale of assets, distribution of proceeds, and finally a determination whether the debtor is discharged from further liability.
After a Chapter 7 bankruptcy, creditors may not collect later, which gives the debtor a fresh start, financially speaking, by receiving a discharge of all debts. In Chapter 7 bankruptcy, creditors accept a lesser amount, in satisfaction of the debt. Unless the debts are very, very large, the petitioner will probably not be further indebted.