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When you file Chapter 7 – What happens to your property?
In Chapter 7 bankruptcy, filers are granted a discharge from certain debts, which means they’ll never have to pay those old bills and they can start fresh again.
Chapter 7 may also offers strong protections for your home, car and other types of property through federal state laws known as Chapter 7 exemptions.
Exemptions outline the types and amounts of your property that are fully protected from a forced sale during your bankruptcy. While Chapter 7 bankruptcy laws provide that some property can be liquidated to repay creditors, in almost every Chapter 7 case there is no property sale of any kind thanks to these exemptions.
The specifics of exemptions vary by state. To know the protections that are available to you, speak with a Chapter 7 bankruptcy lawyer in your state.
What is a Chapter 7 Exemption?
Exempt property is any item or property you own which, by law, is excused or protected from liquidation. To put it simply, an exemption applies to anything your trustee can’t sell to raise money for your creditors. As long as your property falls within the exemption amounts, you may be able to hang on to your exempt assets.
As far as what types of property are considered, the Chapter 7 bankruptcy laws vary from state to state. Most states provides bankruptcy exemptions for basic and necessary items.
How Much Property is Protected?
This is where your bankruptcy lawyer plays an important role. Specific exemptions differ from state to state, so the Chapter 7 exemptions that apply to your case depend on where you live.
Also, your family situation may affect your exemptions, too. For example, if you are married or have children then, in some states, more of your property may be exempt.
Most states, though, excuse similar kinds of property from bankruptcy proceedings, including:
- Some wages and savings
- Work tools
- Other personal property
But how much of these can you keep? Again, that varies according to states. Some state laws are written to allow simply “100 percent of all property” of a certain type. Other times, laws put a limit, such as “Up to $5,000 worth” of a given form of property.
Get more information on the Chapter 7 bankruptcy laws in your state.
Will Chapter 7 Protect Your Stuff?
While this question depends on your specific belongings and circumstances, most people who are eligible to file for the protection of Chapter 7 bankruptcy have little or no non-exempt property. In most Chapter 7 cases, there is no sale of any property.
In other words, in the eyes of the bankruptcy law, they need everything they own and typically keep most, if not all, of those possessions.
For complete details on how your property would be protected if you filed Chapter 7 bankruptcy, speak with a local bankruptcy attorney. Your attorney can discuss your case and the laws in your state.
To connect with a bankruptcy attorney near you, simply complete the form on this page, or call, toll free, 877-226-6844.
If you have certain valuable possessions, like a lot of equity in your home or multiple cars, that you’re not willing to part with, you may want to consider filing under Chapter 13 bankruptcy.