What happens when a person files Chapter 7 bankruptcy?

When a person files for Chapter 7 bankruptcy, a significant aspect of the process is that a trustee is appointed to oversee the liquidation of the debtor’s assets. This is a critical step in the bankruptcy process, as the trustee's role is to assess the debtor's property, sell non-exempt assets, and distribute the proceeds to creditors in accordance with the bankruptcy laws.

The liquidation process is intended to convert the debtor's non-exempt assets into cash, which is then used to pay off as much of the debt as possible. This is why the appointment of a trustee is an essential feature of Chapter 7, as they ensure that the process is conducted fairly and according to legal standards.

In contrast, while it may seem that all claims against the debtor can be extinguished in bankruptcy, this is more nuanced. Not all debts may be discharged, and certain obligations may remain. Additionally, the implications for a business are different from consumer debt, where the business might face other outcomes beyond asset liquidation. Therefore, understanding the role of the trustee is fundamental to grasping the Chapter 7 bankruptcy process.