What does Chapter 7 of the Bankruptcy Code provide for?

Chapter 7 of the Bankruptcy Code specifically provides for the liquidation of a debtor's estate. This means that when an individual or business files for Chapter 7 bankruptcy, their non-exempt assets are sold off to pay creditors. The process is handled by a court-appointed trustee, who oversees the liquidation and ensures that the proceeds are distributed fairly among the creditors.

During this process, individuals may retain certain exempt property, such as basic household items and a portion of equity in their homes, depending on state laws. Once the liquidation process is complete, the debtor typically receives a discharge of most debts, allowing them a fresh start financially.

Reorganization, as mentioned in Chapter 11 of the Bankruptcy Code, is aimed at restructuring the debts rather than liquidation. Similarly, family farmers have specific protections outlined in Chapter 12, and individual debt repayment plans are covered under Chapter 13. Thus, the context of Chapter 7 as focusing on liquidation sets it apart from the other options presented.