What type of bankruptcy does Chapter 7 refer to?

Chapter 7 refers to a liquidation bankruptcy, which applies to both individuals and businesses. In this process, a trustee is appointed to oversee the sale of a debtor's non-exempt assets, with the proceeds being used to pay off creditors. Under Chapter 7, individuals can discharge most of their unsecured debts, providing them with a fresh financial start.

This type of bankruptcy is distinct from other types, such as Chapter 11, which focuses on reorganization plans for businesses, allowing them to continue operating while restructuring their debts. Similarly, Chapter 12 is specifically designed for the repayment plans of farmers, and Chapter 13 allows individuals with regular income to create a repayment plan to pay off their debts over time. Chapter 7 does not involve repayment plans or the reorganization of debts, making it a straightforward option for those seeking rapid relief.