Chapter 7 bankruptcy is one of several branches of bankruptcy you can use if you are struggling with debt you cannot repay. The most significant benefit of this branch is the forgiveness of debt it provides for qualifying debts. The downside is the potential for losing the property you own. Filing for Chapter 7 does not automatically mean you will lose property, but there are risks, and this is what property exemptions are for in Chapter 7 cases. Here are three vital things to know about property exemptions in this branch of bankruptcy.
1. The Definition of a Property Exemption
Lawyers call Chapter 7 bankruptcy the liquidation branch, as it may require selling assets to raise cash to pay off debts. The court assigned to your case reviews your assets and liabilities to determine which assets to seize, but the court can only take assets that are not exempt. Exempt property is an asset the court cannot touch. It is property that you get to keep even if you file for Chapter 7.
If the property you own is non-exempt, it means that the trustee of the case can take the item. It is important to know that trustees do not always take property just because it is non-exempt. They will only take an item if they can easily sell the article and if they can raise a significant amount of cash by selling it.
2. How Exemptions Work in Chapter 7 Cases
Your state has rules about exemptions, and your bankruptcy lawyer can help you understand the rules in your area. Most areas have laws that let people exempt basic things they own, though. For example, you can usually exempt all the furniture, clothing, and household items you have. You might be able to exempt a specific amount of your house equity too, and you can also generally exempt a vehicle you own if you have little equity in it.
3. How Your Bankruptcy Lawyer Helps You
One of the top goals your attorney will have is to help you exempt as much property as possible when filing your case.
If you plan to use Chapter 7, you must understand the risks involved. You should also learn more about the benefits. By learning both, you can weigh the pros and cons to see if you should follow through with filing. For an evaluation of your case, call a bankruptcy law firm, such as Martinez Law Firm, today.