Are you drowning in debt with no end in sight? Filing for Chapter 7 bankruptcy may be your best option. Here is what you should know about your legal rights and this debt relief process.
How Does Chapter 7 Bankruptcy Work?
If your monthly bills come to more than you can afford to pay each month, a Chapter 7 bankruptcy can change all that. If you enter into this process, your unsecured debt can potentially be completely eliminated. Unsecured debt is debt that doesn't have collateral attached to it. For example, debt incurred from anything purchased with a credit card is unsecured debt. Medical bills, department store credit accounts, and utility bills are all examples of unsecured debt.
In order to eliminate this debt, your property and assets may need to be liquidated, which is why Chapter 7 bankruptcy is often referred to as "liquidation bankruptcy." This means your assets will be sold, and the proceeds will be used to pay off your debt. However, state and federal law allows for certain exemptions, meaning not necessarily everything you own will need to be sold.
How Do Chapter 7 Bankruptcy Exemptions Work?
Laws vary from state to state on whether state or federal exemptions must be used. In some states, the petitioner, you, may have the option of choosing whether you want to follow the federal or state exemptions. Your Chapter 7 bankruptcy attorney will assess which set of exemptions will be most advantageous to you. Other states leave you no options and you must follow their state-mandated exemptions.
Federal exemptions have set allowances for your property and assets. For your home, nearly $24,000 of the equity will be exempt. For married couples, this amount of each exemption is doubled, so in this case, approximately $48,000 of your home equity is exempt. If you don't have that much equity built up, the court-appointed bankruptcy trustee may decide it isn't worth it to sell your home. This depends on the amount of your debts. This also doesn't necessarily mean the lender won't still move forward with foreclosure proceedings, however. Other exemptions include up to $3,775 for your vehicle(s), $12,625 for household goods, and $1,600 in jewelry. Remember, these amounts double for married couples. Your retirement accounts may also be exempt.
What Is The First Step In Filing Bankruptcy?
Your first step is to find an experienced Chapter 7 bankruptcy lawyer. Don't fall for online advertisements that say you can do it yourself. While you technically have that legal right, it is far too complicated a process for the average person. You want to be assured that you are fully legally represented and protected through this process.
Share10 December 2018
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