What is a Chapter 7 Bankruptcy?

A Chapter 7 bankruptcy is commonly referred to as a liquidation. In a Chapter 7 bankruptcy, all assets a debtor owns, including legal or equitable rights, are put into a bankruptcy estate. A court-appointed trustee is then assigned to see if any of those assets can be sold to partially satisfy the debts the consumer has incurred. Many of the assets in the bankruptcy estate, however, can be protected by applying what are called "exemptions." Exemptions vary from state to state, and in Wisconsin, Chapter 7 debtors are entitled to keep, for example, $75,000 ($150,000 for joint debtors) of equity in a homestead, $4,000 of equity in a car, and $12,000 in consumer goods.