---
title: "Chapter 7 Liquidation"
type: Legal Term
source: https://casebriefly.com/legal-terms/chapter-7-liquidation
---

# Chapter 7 Liquidation

Chapter 7 of the Bankruptcy Code provides for the orderly liquidation of a debtor's non-exempt assets by a court-appointed trustee, with the proceeds distributed to creditors according to statutory priority. Available to both individuals and business entities, Chapter 7 results in the cessation of business operations for entities and, for individual debtors who qualify under the means test, a discharge of most pre-petition debts. The trustee's role is to collect the debtor's non-exempt property, convert it to cash, and distribute dividends to creditors in the order prescribed by 11 U.S.C. section 726. Chapter 7 is often called "straight bankruptcy" because it offers a fresh start rather than a repayment plan.

## Related Terms

- means-test
- discharge
- exempt-property
- unsecured-creditor

## Related Cases

- dodge-v-ford-motor-co

## Example

After failing to meet its obligations, a small retail business filed for Chapter 7 liquidation, and the trustee sold its inventory and fixtures to pay creditors before the entity was dissolved.

---
Source: [Chapter 7 Liquidation — CaseBriefly](https://casebriefly.com/legal-terms/chapter-7-liquidation)