Before taking any sort of legal action, it is good to question how taking such a step will truly affect you in the long run. For instance, if you are facing serious economic difficulties - whether you reside in California or elsewhere - a Chapter 7 bankruptcy, if approved, can clear out most, if not all, of your debts, giving you a clean financial slate. This leaves some to wonder if this means they will be starting over with nothing.
While the fiscal relief offered in a bankruptcy filing may be desirable, the thought of losing all of one's property can give people reason to pause before going through with it. Yes, in a Chapter 7 filing, the liquidation of certain assets is a requirement, but there are some items that are exempt from the process.
What kind of property can you keep in a Chapter 7 filing?
If you petition the court for a Chapter 7 bankruptcy, anything you have considered as a necessity for your work or home life may be exempt from the liquidation process. Such items tend to include:
- Certain automobiles
- Uniforms and other reasonable clothing
- Some jewelry
- Home goods and certain appliances
- Work-related equipment
- Judgments awarded in civil cases
What qualifies as non-exempt property?
Property that is considered non-exempt and will be included in the bankruptcy estate is everything that is not deemed a necessity. Examples of non-exempt property are:
- Expensive instruments - unless needed for employment
- Valuable collections
- Bank accounts
- Certain motor vehicles
- Vacation or secondary homes
How does the liquidation process work?
All items that are non-exempt will need to be turned over to the bankruptcy trustee. This individual will be responsible for selling the property in order to pay off-creditors.
What happens if I still have substantial debts after liquidating my assets?
In a Chapter 7 filing, after the liquidation process, there are certain debts that are dischargeable. This means you will not legally be responsible for paying back the money owed. Dischargeable debts include credit card debts and medical expenses - among various others. There are, however, quite a few items that do not qualify for discharge in a Chapter 7 bankruptcy filing, such as:
- Child support payments
- Spousal support payments
- Certain taxes
- Loans for educational purposes
- Criminal or civil restitution orders
Seek help with the bankruptcy process
Going through bankruptcy can be overwhelming. This is especially true when you are unsure of the full effects it will have on your life after the fact.
California residents in need of financial relief can receive the economic help that they need if their bankruptcy filings receive court approval. This is not a process that you have to go through alone. An experienced bankruptcy attorney will have the ability to provide answers to any question you may have after reviewing your case. If taking legal action to seek debt relief is appropriate for your situation, your attorney will do everything possible to get you through it, keeping as much property as possible.