Holding on to Your Property in a Chapter 7 Bankruptcy

Posted January 18th, 2010 by BankruptcyLawyer

Chapter 7 bankruptcies differs from Chapter 13 bankruptcy in that the latter reorganizes the debt, whereas in the former, assets of the debtor are sold off, or liquidated, to repay the debt. The process is long, arduous, and psychically draining. Furthermore, it may be in your best interest to file a Chapter 13 bankruptcy rather than a Chapter 7. One reason for this is that in a Chapter 13 filing, a debtor may be able to keep a home by catching up on late payments through a payment plan. (Essentially Chapter 13 filing will allow you to set up a new payment plan with your creditors). Choosing between Chapter 7 or Chapter 13, or an alternative to these two, of which there are many, is a difficult choice best made with the counsel of a professional.

A bankruptcy lawyer can help allay your fears and confusions about the dizzying process of deciding whether to file for bankruptcy, as well as guide you through the process itself, making both less painful. You can contact their offices directly to ascertain the best course of action in your case. In the meantime, study more on your own about Chapter 7 bankruptcy, in order to better understand the process, and help yourself through this tough time.

The idea behind Chapter 7 bankruptcy is to relinquish the debtor of overburdening assets as well as debt in order to give the debtor a “fresh start.” This fresh start comes with some drawbacks, however. Most importantly, a bankruptcy remains on your credit report for nearly a decade. In Chapter 13 filing, the record is affect for seven years. Regardless of how long your credit is affect for each of the two bankruptcies, you will always be stuck with the fact that you filed for bankruptcy. This means that whenever you need a loan or a new job, and must fill out an application, you will have to state (if asked) against the threat of federal imprisonment, that you were at one point officially, legally bankrupt. For these serious reasons, as well as the fees involved and the lengthy meetings, assessments, and paperwork, you should think very hard on whether to file at all, and what your other options are. The lawyers at David B. Shaev can help you sort through this morass and decide what’s best for you.

More specifically, in a Chapter 7 bankruptcy a trustee “gathers” the debtor’s assets to sell them in order to pay back the creditors. Some of the debtor’s property may be claimed by other creditors through liens or mortgages, furthermore the Bankruptcy Code includes a list of exempt assets the debtor can keep, but the trustee will liquidate the rest. Therefore, Chapter 7 Bankruptcy means the debtor will most likely lose property.

Exemptions are different for different states as well as for the federal standards. The debtor has the power to choose whether to apply his or her state’s exemption guidelines or the federal guidelines. Choosing which is another boondoggle, and best made through the consultation of an attorney. Again, at David B. Shaev, one can receive a free consultation without any obligations.

Here’s a brief (non-exhaustive) list of what debtors usually have to forego in Chapter 7 bankruptcy:

• Any vehicles owned beyond one
• Investments, stock, bond, CDs, Savings
• Expensive Collections
• Family Heirlooms with resale value

Exempt assets, meaning property the debtor will be allowed to keep, include:

• Necessary items for the debtor’s livelihood, such as musical equipment for a professional musician or crafting supplies for a carpenter
• Necessary clothing, housing supplies, vehicles
• Medicare or Medicaid benefits, Social Security, or VA benefits
• Pensions

You should and will have many questions about filing for a Chapter 7 bankruptcy. It is not a decision to be made on your own. Call me for a no fees, obligation-free talk on what’s the right step for you on the road back to financial health.