Filing for chapter 7 bankruptcy can relieve an individual most of his/her debts and work on rebuilding finances anew. This kind of bankruptcy is also called liquidation or straight bankruptcy. When an individual files for Chapter 7 bankruptcy, his assets are sold off to pay the outstanding debts. Whatever cannot be recovered is written off and the debtor is able to start all over.
There were changes in 2005 on Chapter 7 relief which makes it harder to qualify for this kind of bankruptcy. The rules for filing bankruptcy vary on the kind of bankruptcy you are filing for. Getting legal assistance can help you get more information on bankruptcy and how to file for it.
You must pass the ‘means’ test to qualify for chapter 7 bankruptcy. It is also likely that the court will convert a chapter 7 bankruptcy to chapter 13. Individuals who accrued debts when running a business, and veterans who accrued debt while on active military duty have easier rules when filing for Chapter 7 bankruptcy.
Bankruptcy Exemptions: Chapter 7
The process of settling debts after filing for chapter 7 bankruptcies involves selling most of the debtor’s assets to recover as much money as possible. However, some assets are protected by law against liquidation during Chapter 7 bankruptcy. These include residence home and vehicles which are considered basic assets needed for a normal life. Wildcard exemptions are assets that do not fit into designated categories. These protected assets are called exemptions. Many states will allow the debtor to choose what is exempt. Some states will have an exemption list. Federal law also provides an exempt list. State laws vary so it is crucial to check what is applicable.
Exempt vs. Non-exempt Property
Property that is not exempt includes collections of valuable stamps, coins, and other precious items heirlooms. Also included are bonds, cash, stocks, bank accounts, and a second car, a holiday home and other investments. Musical instruments are not exempt except for where the debtor is a musician by profession.
Get a bankruptcy attorney
Getting expert legal opinion is crucial so that you don’t overlook any legal requirements. A bankruptcy lawyer can help you prepare the papers and make a quicker filing. The lawyer will advise you on the need for legal representation during the proceedings.
Many bankruptcy lawyers will offer free initial consultation to assess your case. It is very advisable that you take up on this advice so as to protect your exempt assets and get better relief from debt.