Most people cringe when they hear the word “bankruptcy.” It has so many negative connotations for so many reasons that it can be difficult to remember bankruptcy is a service offering a fresh start to those who was buried under debt of all kinds. Chapter 7 bankruptcy is also known as liquidation or “straight bankruptcy.”
Under Chapter 7 bankruptcy, the debtor lists all nonexempt assets and, if any are listed, they are auctioned off by the trustee and the funds are used to pay the debtor’s creditors. Certain specified debts that have a balance remaining may be discharged by the bankruptcy meaning the debtor no longer has to pay them off.
What Are “Nonexempt Assets?”
These are any assets that are eligible to be liquidized by the trustee for payment to the debtor’s creditors. Exempt assets can be any of the following and are off limits throughout the bankruptcy process:
• Real estate/property
• Tools and/or equipment necessary for the debtor to make a living
• Proceeds from a judgment
• Unmatured life insurance policy
• Unemployment benefit, social security, veteran’s benefit, etc.
Chapter 7 bankruptcy is one of the simplest forms of bankruptcy and is popular because it is relatively straightforward and has the potential to include plenty of discharges. Keep in mind that certain debts such as student loans, child support, alimony, and taxes owed are not dischargeable and will still have to be paid off after the bankruptcy has been filed.
Also, creditors who did not receive satisfactory compensation from the liquidation will try and refute any and all exempt assets that the debtor listed in an attempt to recoup their losses. The best defense for this is the service offered by a licensed bankruptcy attorney.
Related Links:Chapter 7 Claims