Exempt assets are those assets that the debtor does not have to use to repay debts. Generally a certain amount of equity in a person's home, a certain amount of equity in a vehicle, a small amount for clothing, and a small amount for other personal items will be considered exempt property. The court will appoint a bankruptcy trustee to oversee the payment of the debtor's debts. Debts fall into different categories as well. Secured debts are those for which the creditor has a security interest in some of the debtor's property, usually, but not necessarily, the same property that was purchased with the credit.
Secured debts have a priority over non-secured debts.
What this means is that secured debts are paid off first. If the debtor can't pay secured debts, the creditor may take the property in which it has a security interest. This allows the debtor to forestall imminent repossessions and foreclosures. Chapter 7 Bankruptcy is a liquidation type of bankruptcy proceeding. All of the debtor's non-exempt property will be sold to pay their debts.