In a chapter 7 case, the bankruptcy court appoints a trustee to examine the debtor's assets to determine if there are any assets not protected by available "exemptions".
Exemptions are laws that allow a debtor to keep, and not pan with, certain types and amounts of money and property. For example, exemption laws allow a debtor to protect a certain amount of equity in the debtor's residence, motor vehicle, household goods, life insurance, health aids, retirement plans, specified future earnings such as social security benefits, child support, and alimony, and certain other types of personal property. If there is any non-exempt property, it is the Trustee's job to sell it and to distribute the proceeds among the unsecured creditors.
Although a liquidation case can rarely help with secured debt (the secured creditor still has the right to repossess the collateral if the debtor falls behind in the monthly payments), the debtor will be discharged from the legal obligation to pay unsecured debts such as credit card debts, medical bills and utility arrearages. However, certain types of unsecured debt are allowed special treatment and cannot be discharged. These include some student loans, alimony, child support, criminal fines, and some taxes.