Chapter 7 Bankruptcy allows an individual or a business to discharge their debts and in exchange they allow the court to sell their property. After the court distributes the debtor's property to creditors, the debtor is typically no longer responsible for repaying any remaining debt.
This is often referred to as "liquidation bankruptcy."
How does it work?
When you file for Chapter 7 Bankruptcy, you are technically placing the property you own and the debts you owe into the hands of the bankruptcy court. During this process, you're not allowed to give away or sell any of your property and/or you cannot pay any of your debts without getting the consent of the court.
The court appoints a "bankruptcy trustee" to oversee this entire process. The trustee's job is to review your list of assets, determine which assets are non-exempt, sell the non-exempt assets, and repay your creditors as much as possible.