If you ask a bankruptcy lawyer about Chapter 7 bankruptcy, you will quickly learn that they call this the "liquidation" branch of bankruptcy. When you think of this word, you might realize that it means to sell things to generate cash to use for a purpose. Therefore, you might assume that you must sell all your things to repay your debts. While you might have to surrender some assets if you use Chapter 7, many people keep most of their assets. Here is an explanation of how this works in a Chapter 7 case.
The Basics of a Chapter 7 Bankruptcy Case
Chapter 7 bankruptcy is one of several bankruptcy options people use for financial relief. Chapter 7 is unique in several ways, and many people prefer this branch over the others. In a Chapter 7 case, you receive forgiveness for any qualifying debts you have, such as credit card balances. The court has the right to seize some of your assets in return, but they cannot take all of them. They can only take nonexempt assets.
The Difference Between Exempt vs. Nonexempt Property
Therefore, you must understand the differences between exempt property and nonexempt property. Exempt property refers to the assets the court cannot take if you file a Chapter 7 case. The assets the court labels as "exempt" are those that you can keep. Every state has rules relating to exempt property, and many states let you keep all your personal items in your home. They might also let you keep your car and house. Nonexempt assets are the things the court can take, such as cash in the bank and your next tax refund check.
Completing Reaffirmation Statements for Loans
If you keep assets with loans, the court might require that you sign reaffirmation agreements with your lenders. For example, if you want to keep your car but owe money on it, you can sign a reaffirmation agreement with your auto lender. This agreement lets you keep the car with the loan if you agree to continue making payments on the car. You must make the payments as you initially agreed to make.
As you can see, you might lose some assets in a Chapter 7 case, but you most likely will not lose everything. Are you ready to find out if Chapter 7 is right for you? You can contact a bankruptcy attorney to learn more about your options.