Chapter 7 bankruptcy is, at its heart, a fresh start.
It is a legal proceeding in which an individual or married couple, called Debtors, seek relief from the bankruptcy court. In essence, the Debtors say to the court, "we don't have any money to pay our debts, and we don't have anything we can sell to pay our debts." In those circumstances, the bankruptcy court will then discharge those debts, which means that the Debtors do not owe them any more and the creditors cannot engage in any collection action against the Debtors anymore.
Chapter 7 bankruptcy is also called "straight bankruptcy" or "liquidation." There are procedures in the bankruptcy code that allow the bankruptcy trustee to sell a Debtor's assets to pay creditors. However, Debtors are protected under Illinois law by exemptions, which protect certain assets from being taken to pay debts. In the vast majority of cases, the Debtors do not have anything that can be taken to pay creditors, and the trustee makes a report of "no assets" or "no distribution" to the bankruptcy court.
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