A:Chapter 7 is a liquidation bankruptcy that wipes out most of your general unsecured debts such as credit cards and medical bills without the need to pay back balances through a repayment plan. Often referred to as a clean slate, the Chapter 7 bankruptcy is designed to eliminate debt. It is important to fully understand the bankruptcy exemptions in your state to ensure you don’t risk losing property that is important to you like a vehicle or a home.