Assets and Chapter 7 Bankruptcy

Chapter 7 bankruptcy is a legal move that individuals make to get a fresh financial start. There are many situations in which individuals have found themselves in a financially limiting situation. It could be medical bills that put you here. For others it is due to making poor financial decisions. Still others struggle with problems related to failed investments or businesses. In situations where you are facing a significant financial mess, it is important to turn to an attorney to discuss your options in filing to be bankrupt. This can give you a fresh financial future, but you do have to consider the implications it has on your future, too.

What About Your Assets?

The biggest factor that makes Chapter 7 bankruptcy stand out from other forms is that individuals can lose their assets as a result of filing. When you file this form, you are requesting that the courts dismiss your debt if and when you turn in your assets. This is done for two reasons. First, you are requesting the court forgive any debts you have. This means you will not have to repay those debts at any time in the future. The second step or benefit of filing is that the creditors, who you owe money to, get to take any assets you own as compensation. However, there are some very specific rules here.

• There are some types of property protected by the laws of the state. This may include a vehicle, some types of assets required for maintaining your business, and personal effects. These will change per state and your attorney can tell you specifically what is protected.

• When it comes to your home, you will likely get to keep it if it does not have a lot or any equity built into it. If your home is worth a considerable amount more than what your current mortgage balance is, the state can force you to sell it to pay back your creditors.

• In many cases, you can keep the car loans and home loan if you can keep it current. In other words, you need to be able to keep making payments. Reaffirming these loans is an important step and it will require that your lender be willing to keep working with you on those payments.

It is a good idea to talk to your attorney about the risk of losing your assets when you are filing for this form of bankruptcy. Chapter 7 bankruptcy is a big benefit to those who need it, but if you are likely to lose many of the assets you want to keep, you may want to choose another form, such as Chapter 13. Talk to your attorney about your options.