If you’ve been struggling to pay your bills and your income is simply not enough to cover your debts, it’s probably time to file for a Chapter 7 bankruptcy. Of the two types of bankruptcy filings most frequently used by consumers, Chapter 7 is the one that will entirely discharge most of your debts rather than simply reducing, reorganizing or recalibrating your existing debts (which is what happens under a Chapter 13 bankruptcy). Though the discharge of debts has the obvious advantage of presenting you with a brand-new financial start, it also comes with the downside of having to sell of many of the assets that you own. This process is known as liquidation, and before you embark on a Chapter 7 bankruptcy you should be aware of exactly what that asset sale will mean to you.

When you file for Chapter 7 bankruptcy, your attorney will ask you for a comprehensive list of all of your debts as well as your assets and your income information. With that in hand, they will calculate whether you are eligible for Chapter 7 bankruptcy and begin preparing the paperwork for presentation to the bankruptcy court. Once your application has been filed, a trustee will be appointed to administer the process of discharging your debts and overseeing the liquidation of your non-exempt assets. Cash from the sale of those assets will then be used to pay off at least a portion of your debts, providing your creditors with some level of satisfaction in the face of the loss of the monies that you initially committed to pay them.

The rules around the liquidation of assets under Chapter 7 vary by state, but under federal laws, only $23,675 of the value of your home or other real property including mobile homes or burial plots can be exempted. You may be able to retain a vehicle up to a value of just over $3,775, and you will be able to hold on to clothing, most furniture and possessions that have sentimental value up to a total of $12,625. You can also exempt cash up to $1,250 and up to $11,850 of any unused portion of the homestead exemption. Beyond that, anything else is considered available for liquidation.

If you are considering filing for a Chapter 7 bankruptcy and you need a better idea of which of your possessions you will be able to hold onto, contact us to set up a time for a conversation.

 

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