Chapter 7 personal bankruptcy is also known as straight bankruptcy or liquidation bankruptcy. Under chapter 7, debtors are sometimes required to turn certain property under their ownership at the time of filing over to a trustee. This property is sold and the proceeds are used to pay creditors. This process is known as “administration” of the estate. It is important to note that in the vast majority of cases the debtor is allowed to keep most, if not all of their property. Debtors are required to file a schedule of exemptions in which they may elect to apply certain statutes, known as exemptions, to protect from the trustees and creditors, the equity they have in their property. Exemption statutes typically allow debtors to retain a portion or all of the equity they have in a given type of property like the homestead, a vehicle, household goods and tools of trade. 
 
Individuals Filing Chapter 7 :
 
 
Individuals can file for bankruptcy in a federal court under Chapter 7 or Chapter 13. In a chapter 7 bankruptcy the individual is allowed to keep certain exempt property. Most liens however survive. The value of the property which can be claimed as exempt varies form state-to-state. Other assets, if any, are sold by the interim trustee to repay creditors. Many types of unsecured debt are cancelled. A disadvantage of filing for personal bankruptcy is that a record of it stays on an individual’s credit report for 10 years. This could make credit less available and/or terms less favorable in the future. 

Businesses Filing Chapter 7 :

When a troubled business is badly in debt and unable to service that debt or pay its creditors it may file for bankruptcy in a federal court under chapter 7. A chapter 7 filing means that the business ceases operations. A chapter 7 trustee is appointed almost immediately. The trustee generally sells all the assets and distributes the proceeds to the creditors.