If you have found yourself with more debt than you can realistically repay, filing for Chapter 7 bankruptcy may give you the opportunity you need to start fresh. However, before making any final decisions regarding your desire to file for bankruptcy, there are a few facts that you should know.
Chapter 7 Bankruptcy May Not Eliminate All Of Your Debts
Many people envision walking away from their bankruptcy hearing completely free of debt. However, this is not the way bankruptcy laws work. When filing for Chapter 7 bankruptcy, you will only have the opportunity to discharge certain unsecured debts. In order for a debt to be considered unsecured, this debt cannot represent a lien against any real property, such as you house or vehicle.
All debts which are not covered under Chapter 7 bankruptcy laws will still need to be paid according to the original terms of the loan or you will be subject to foreclosure or repossession proceedings. The creditor may also be able to obtain a judgement against you in order to recoup their losses.
Your Assets Will Be Limited When Filing For Chapter 7 Bankruptcy
The bankruptcy court recognizes the need to be fair to both debtors and creditors when dealing with Chapter 7 bankruptcy cases. Therefore, the court has limited the number of assets which you can maintain when seeking bankruptcy relief. This is done through a series of laws known as property exemption or bankruptcy exemption laws.
Each state has there own set of exemption laws which are used in Chapter 7 bankruptcy cases. There is also a set of federal exemptions which can be used in any state. When filing a bankruptcy petition, you will need to choose between the use of you state's exemptions or the federal exemptions.
Which of these exemptions will be most beneficial in your case will depend greatly upon what type of assets you posses. While some states will offer a larger homestead exemption, they may fail to offer a significant motor vehicle exemption. Consequently, if you own your vehicle but rent your home, choosing the federal exemption will be a better choice since it allows you to protect more equity in your primary vehicle.
Protecting as many of your assets as possible can be a complex process. This is why you should always consult a reputable bankruptcy attorney, like Anthony Inserra Attorney at Law, before making any decisions in your case, including disposal of assets.Share