What is chapter 7 and how does it work?

Chapter 7 is that part (or chapter) of the Bankruptcy Code that deals with liquidation. A person who files under chapter 7 is called a debtor. In a chapter 7 case, the debtor must turn his or her nonexempt property, if any exists, over to a trustee, who then converts the property to cash and pays the debtor's creditors. In return, the debtor receives a discharge of most or all his debt