Millions of Americans face the prospect of looming debt in their day-to-day lives. Not only does this cast a cloud over the family financial situation, but it can also affect a person’s mood and activities – overwhelming debt can leave a person feeling hopeless.
But, for many, there is hope. They need to ask themselves: Is Chapter 7 bankruptcy an option?
Chapter 7 basics
There are some common misconceptions about bankruptcy in general, and Chapter 7 bankruptcy in particular. For some, the misconception is this: I file for bankruptcy, lose everything and the debt is discharged. That isn’t always the case and, in fact, many people who file for Chapter 7 bankruptcy get to keep many of their assets.
One of the basic concepts about bankruptcy to understand is that of exempt assets. These are assets that are not subject to the liquidation phase of a Chapter 7 bankruptcy filing. However, each person’s bankruptcy case is unique, so what assets you may be able to list as exempt in your case varies – and state law oftentimes plays a role as well.
In essence, when a person files for Chapter 7 bankruptcy they are required to list all non-exempt assets, which are then liquidated and then the proceeds are applied toward outstanding debt obligations. In general, after that, any debt obligations that are not satisfied are discharged.
Chapter 7 bankruptcy doesn’t have to be confusing or complicated. For many filers, the process can actually be quite streamlined. If you are facing a debt situation that feels like it is getting out of control, you may want to consider the benefits of Chapter 7 bankruptcy.