Chapter 7 bankruptcy is a popular choice among individual debtors because it makes it possible for them to have a large number of debts discharged. However, the process will also require that a significant amount of their assets is liquidated in order to pay back the debt.
It is important that you fully understand the process of asset liquidation in Chapter 7 bankruptcy before filing. This will help you to be fully prepared and in control.
Who is responsible for liquidating assets?
In Chapter 7 bankruptcy, a trustee is appointed to oversee the liquidation process. They will have the responsibility of selling all nonexempt assets and using the money gained to pay off the debts.
What assets are exempt from liquidation?
The purpose of Chapter 7 bankruptcy is to try and liquidate as much property as possible. This means that if you own a home, it may be subject to liquidation. Federal law exempts only $20,000 against the value of a home. You will also benefit from a motor vehicle exemption so that you can continue to drive. Federally, this was set at $3,225 in 2010. Additionally, there is a possibility to keep a wide range of personal property, including clothing and sentimental possessions.
Is filing for Chapter 7 bankruptcy the right choice for me?
If you are overwhelmed by debts and you currently have a limited income, you may benefit from filing for Chapter 7 bankruptcy. In order to be successful, you will need to demonstrate that you are unable to pay off your debts by passing a means test. It is important that you conduct research into all your debt relief options.