Chapter 7 bankruptcy is a legal, constitutional way to discharge debt that you can’t afford to pay off. Millions of Americans have used this type of bankruptcy, often called a liquidation, to get rid of credit card debt, medical bills and other burdens that were caused by circumstances beyond their control, and other tough circumstances.
Many consumers are overjoyed at the relief they experience through Chapter 7, which makes creditors stop calling and causes qualifying debts to disappear. But the “liquidation” part gets a lot of people worried about what they have to lose if they file for bankruptcy. If you’re considering bankruptcy, you may be wondering, wisely, what the downside is.
Qualifying for Chapter 7
Chapter 7 bankruptcy isn’t for everyone. If you think you qualify for Chapter 7, you’ll want to have an experienced bankruptcy attorney evaluate your assets and your debts and present you with your options. One option may be NOT to file because you don’t need bankruptcy. It can be helpful to learn about the Chapter 7 means test, which looks at your income and your debts with regard to certain Tennessee rules.
Your most important assets
By law, some assets are exempt in a Chapter 7 bankruptcy, meaning that you can keep them. Exempt assets could include your car, equity in your home, some jewelry, your clothing and house furnishings, your pension and much more. It depends.
But if you’re sitting on a huge pile of cash and diamonds, for example, Chapter 7 probably isn’t the right thing for you. Certain assets are easy to liquidate and use to pay off your debts, so they’re harder to keep in certain bankruptcy situations.
Chapter 7 may not be right, but bankruptcy may be
For some people who are struggling with debt, Chapter 7 isn’t appropriate because of their earnings or their assets. In such cases, Chapter 13 can be a fantastic solution because it allows the filer to keep many assets and get onto a debt payment plan they can afford.
Every debt situation is different. If you’re trying to understand your legal rights, it is important to talk to a knowledgeable attorney about your debts and your goals.