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Legal Helpers Tip: A Chapter 7 bankruptcy is basically a simple liquidation event. The debtor essentially gives all of his/her non-exempt property to a bankruptcy trustee. The trustee then sells or otherwise converts this personal and real property to cash to be distributed to the creditors. After the disbursement of the debtors proceeds, all former debts listed, regardless of how much the creditors were paid, are erased. The intent of Chapter 7 bankruptcy laws is to provide a new financial start for individuals or businesses who were hopelessly enmeshed in debt.