Chapter 7 bankruptcy offers people the chance for a fresh start. The process is fairly straight forward and in most cases, people are able to keep all of their possessions, including their car, home and other valuables. Chapter 7 bankruptcy is also called “liquidation” bankruptcy because in the event you own property that is not “exempt” the bankruptcy trustee will take it and “liquidate” it by selling it and using the proceeds to pay your debtors. But didn’t we just say that in most situations people are able to keep their possessions? we did, and this is how it works. People are allowed to keep possessions up to a certain dollar amount. Some of those numbers are as follows:
• Bank accounts up to $2,500.00 per person ($5,000.00 total for a married couple filing bankruptcy)
• Automobiles with equity of up to $2,400.00 if used to drive to work.
• The home you live in, if you qualify as head of household, and/or if you are 65 or older, with equity of up to $60,000.00
• Household furnishings and goods up to $1,500.00 ($3,000.00 total for a married couple filing bankruptcy)
If you own property that is worth more than the above mentioned “exempt” values, you may still be able to keep that item. If it is substantially more than the exempt amount, the chapter 7 trustee may accept payments from you to “pay off” the non-exempt amount; or you may decide to file chapter 13 bankruptcy to achieve the same result. The bottom line is, if you work with an experienced bankruptcy attorney, you will more than likely be able to keep all the possessions you own that really matter to you.
So what’s the upside to filing chapter 7 bankruptcy? The upside is legally and ethically discharging the debts you cannot pay in a way that is legally binding on your creditors. In other words, you will no longer owe or be financially or legally obligated to pay certain types of debts. What are those debts that are completely discharged?
• credit cards such as VISA, Mastercard, AmEx
• certain store cards (some store cards, like ones from a jewelry store, may have a lien against the items you purchased with it. Talk to your attorney regarding this)
• Personal loans from banks or individuals
• Checking account overdrafts
• Medical and dental bills
• Bills from cell phone companies, internet providers, cable TV, utilities, etc
• Certain tax obligations
Other types of debt are not discharged in chapter 7, these include
• Child support and alimony payments
• Most taxes
• Debts obtained through fraud or deception
• Child support and alimony payments
• Court-ordered fines and criminal restitution
• Student loans
• Debts for personal injuries caused by driving while intoxicated
The fact of the matter is that filing for chapter 7 bankruptcy does not have to be a scary or daunting challenge. If planned out with someone who knows the bankruptcy laws and local rules, you will keep most, if not all, of your possessions. If there’s any question at all, your bankruptcy attorney can tell you in advance what the issues are.