Chapter 7 bankruptcy, also known as liquidation bankruptcy, is the most common form of bankruptcy in the United States. Although hundreds of thousands of Americans file Chapter 7 bankruptcy every year, there are still numerous misconceptions about the process.
One of the biggest misconceptions is that you will have to sell all your assets to repay your creditors. While Chapter 7 does often involve liquidation, you will certainly not lose all your belongings.
Which assets will I have to liquidate?
Liquidation refers to the process of selling certain assets to repay your creditors. However, you will not have to liquidate all your property. Some assets are exempt from liquidation up to a certain dollar value of equity. For single filers, these assets include:
- Cars and other vehicles up to $1,700
- Clothing and jewelry up to $1,800
- Furniture and decor up to $3,000
- Real estate up to $25,000
- Firearms up to $1,000
These exemptions ensure that you will not lose everything to your name. You will simply work with a bankruptcy trustee to determine which assets you will sell and which you will keep.
How to protect your assets in Chapter 7
Granted, every bankruptcy case is unique. The assets you get to keep will not necessarily be the same as those that another filer gets to keep. Some Chapter 7 cases do not involve any liquidation at all.
If you are interested in keeping as many of your assets as possible, it is wise to work with a bankruptcy attorney. A lawyer can not only guide you through the complex legal process but also advocate for your best interests in your bankruptcy hearings.