Describe a liquidation proceeding under Chapter 7. Who may and may not be a debtor in a liquidation proceeding? How is the proceeding commenced?

Liquidation under Chapter 7 of the Bankruptcy Code is a common type of bankruptcy proceeding
and is often referred to as ordinary, or straight, bankruptcy. A debtor in a liquidation bankruptcy
states his or her debts and turns all assets over to a bankruptcy trustee. The trustee sells the
nonexempt assets and distributes the proceeds to creditors.
With certain exceptions, the remaining debts are then discharged (extinguished), and the debtor is
relieved of the obligation to pay the debts.
Any “person”—including individuals, partnerships, and corporations—may be a debtor in a
liquidation proceeding. A husband and wife may file jointly under a single petition. Insurance
companies, banks, savings and loan associations, investment companies licensed by the Small
Business Administration, and credit unions cannot be debtors in a liquidation bankruptcy, however.
Rather, other chapters of the Bankruptcy Code or federal or state statutes apply to them.
A straight bankruptcy can be commenced by the filing of either a voluntary or an involuntary
petition in bankruptcy—the document that is filed with a bankruptcy court to initiate bankruptcy
proceedings. If a debtor files the petition, it is a voluntary bankruptcy. If one or more creditors file
a petition to force the debtor into bankruptcy, it is an involuntary bankruptcy