Do you lose all of your property in a Chapter 7 bankruptcy?

On Behalf of | Mar 26, 2018 | bankruptcy

There are many things that could leave you facing considerable debt. Perhaps you suffered a major medical emergency which led to crushing medical bills. Maybe a loss of income through a divorce or unemployment caused your bills and debt to pile up. Or perhaps circumstances combined with a high credit card interest rate to leave you with a level of credit card debt that worries you greatly.

What benefits can come from Chapter 7 bankruptcy?

When debt has gotten overwhelming, your thoughts may go to how best to escape this tough financial situation. One route you may be considering is Chapter 7 bankruptcy. Depending on your circumstances, filing for such a bankruptcy might provide you with some important benefits. It could help with stopping creditor harassment. Also, it might be able to help relieve your debt burden through a discharge of debt.

What about your property?

Of course, your thoughts might not just be on the potential benefits of this form of bankruptcy. You might also have worries about the Chapter 7 bankruptcy route. This includes worries about what such a bankruptcy would mean for your property.

One thing that may be a source of concern for you on this front is one of the names commonly given to Chapter 7: liquidation bankruptcy. The word “liquidation” may conjure up images of all of your property circling down the drain, never to be seen again.

It is true that, in Chapter 7 bankruptcy, there can be the potential for a person’s property to be sold off in order to pay creditors. However, there are important limits to this. These limits could provide you with some very important property protection if you go the Chapter 7 route.

The important role of exemptions

Among these key limits are exemptions. In Chapter 7 bankruptcies, certain types of property can be claimed as exempt. Being exempt protects property from liquidation.

Through a strategic use of exemptions, it could be possible for a person going through a Chapter 7 bankruptcy to keep most, and possibly even all, of their property. This could include the assets that matter to them most.

What the specifics of exemption law could mean for you

Now, what exemptions are available in bankruptcy varies among the states. So, here in Georgia, what specific exemptions you could claim under state law and how the specific property you have would interact with those exemptions could greatly impact how great of protection your property would likely enjoy in a Chapter 7 bankruptcy. This in turn could impact how suitable of a debt relief solution Chapter 7 would be for you. So, when considering Chapter 7 bankruptcy, this is one of the topics you may want to discuss with a knowledgeable bankruptcy lawyer.