There are two primary types of consumer bankruptcy – Chapter 7 bankruptcy and Chapter 13 bankruptcy. Chapter 7 bankruptcy is often referred to as “liquidation” or “straight” bankruptcy because it involves completely discharging your debits in exchange for some of your property. Once you decide to file, you will be able to keep “exempt” property, which typically includes items you need for basic living, such as furniture, your vehicle, and your house.
Any property that is considered not exempt will be sold and the proceeds will be given to your creditors to repay a portion of your debts. If you are behind on your car payments or your mortgage, and you want to keep all of your property, Chapter 7 bankruptcy may not be the best option for you. This is because when you file, Chapter 7 does not fully prevent car loan creditors or mortgage holders from taking your assets to repay your debts.
Unlike Chapter 13 bankruptcy, there are certain qualifications you must meet to file under the Chapter 7 bankruptcy code. For example, to file, your income must be below the median family income for your state. However, if your income does exceed the median family income for your area, special extenuating circumstances may still allow you to file.
The decision to file Chapter 7 bankruptcy is significant, and you may have concerns or hesitations about what lies ahead. If you have any questions about the bankruptcy process or need help filing, reach out to us at Arnold Law Offices today.