CHAPTER 7
BANKRUPTCY.
What Chapter 7 does.
Chapter
7 bankruptcy is the kind most people think of when they
consider bankruptcy. It's the kind that wipes out all of
your unsecured debt, such as credit cards, payday loans,
medical bills, bounced checks, car repossessions, broken
leases, etc. Chapter 7 also stops all lawsuits, wage
garnishments, debt collector calls, and any other type of
collection activity. You can use chapter 7 to walk away
from debts on collateral that you don't want to keep and pay
for, like car loans or furniture loans.
What Chapter 7 doesn't do.
Chapter 7 bankruptcy won't help you keep your home or car
if you are behind on payments (for that situation take a look
at chapter 13). In most cases, chapter 7 won't help you
get rid of tax debts. Chapter 7 also does nothing to
eliminate child support, alimony, and debts owed to
governmental agencies (like unemployment or social security
overpayments).
What will I lose if I file Chapter
7?
When you file chapter 7 bankruptcy, there is some kind of
property the bankruptcy trustee can take away from you and
sell, using the proceeds to pay off some of your debt.
This kind of property includes cars worth more than $2,500
that have no debt on them, high-end consumer electronics like
big screen televisions, art, antiques, collectibles, guns,
jewelry, stocks, cash, bonds and other investments. You
could also lose your home if you have more than $20,000 worth
of equity in the home (or $40,000 for a married couple).
What cannot be taken in a Chapter
7?
Most of the personal property people own--such as
clothing, household furnishings and appliances--are protected
under bankruptcy law and cannot be taken away from
you. The best way to determine what is and what is
not at risk of being seized is to make a detailed list of
everything you own and ask a seasoned bankruptcy lawyer what
would happend to the property in a chapter 7. I go
through this process every day with my clients. In the
majority of cases, my clients have nothing to
fear.