When filing for bankruptcy, there are several different classifications. Chapter 7 bankruptcy is intended for individuals who do not have the income or assets to pay back a significant portion of their debts under a chapter 13 repayment plan. Under a chapter 7 bankruptcy, most or all of your debts are completely discharged. Though exact criteria vary from state to state, most debtors are able to keep a portion of their property.
The Chapter 7 Bankruptcy Process
In a chapter 7 bankruptcy, an impartial trustee is assigned to your case. The trustee looks at your income and assets to determine which debts can be discharged and what assets should be liquidated during the bankruptcy process. Bankruptcy guidelines permit debtors to keep certain types of property, while others must be sold to assist in debt repayment.
The trustee for a bankruptcy case realizes that the debtor needs a certain amount of property or assets to get a new start. These assets are known as exempt assets and cannot be sold to pay back creditors.
Each state has unique rules governing what property is eligible for exemption. Every state has some form of a homestead exemption intended to help a debtor keep an affordable primary residence. Some states permit a certain amount of home equity to be exempted from bankruptcy, while others permit the entire amount of equity in a primary home to be exempt.
A qualified bankruptcy attorney can help you understand the guidelines in your state. The rules also vary depending on whether a debtor is married or single.
You are eligible for your state's homestead exemption even if you do not have a mortgage on your home.
The contents of your home, such as your clothing, furniture, and home wares, are usually exempt as long as you do not have immensely valuable items.
Concerning your personal vehicle, a certain amount of vehicle equity is eligible for exemption. Exact regulations for this exemption vary in each state. If you have an amount of vehicle equity that is greater than the exemption amount, you may be required to sell your car to help repay your debts.
The bankruptcy trustee has the final say over what items may be kept and which ones must be sold. If the value of an item is barely over the exemption amount, the trustee may allow the debtor to keep it due to the costs associated with selling the property. This known as abandoned property.
The prospect of a chapter 7 bankruptcy is daunting; you may worry that the process will leave you with nothing. Fortunately, individuals who qualify for a chapter 7 bankruptcy are allowed to keep a certain portion of their property. This lets you get the fresh start that you need to rebuild a secure financial future.