The goal of Chapter 7 bankruptcy is to liquidate your assets. Once you’ve sold these assets off, you can take the money that you’ve earned from selling them and use it to repay some of what you owe the creditors. You do not have to repay 100% or anything close to that. The remaining balance will simply be forgiven after you have liquidated all of the assets that you can.
This is also one of the main things that people are worried about with Chapter 7 bankruptcy. They understand that it can bring them financial relief, but there are concerns that they will have lost everything valuable to them. Are you going to lose all of your assets and should you actually be concerned about this?
Many assets are exempt from this process
You will certainly not lose everything. Your assets will be divided into two categories, which are exempt assets and non-exempt assets. The non-exempt assets are the ones that have to be sold off, but you’ll find that many of the things that you would have wanted to keep are going to be exempt.
For instance, your car and your home have an exemption up to a certain level. This may not work if you have multiple vehicles and some of them are viewed as unnecessary, but the point isn’t to take away your daily driver and make it impossible for you to work after the bankruptcy has concluded. You’ll get to keep your main car, along with the tools of the trade and other things that you need to continue in your profession.
Family heirlooms and jewelry can also be exempt from this process. Again, there may be caps in value on this, but you’re not expected to give away everything that has been so important to your family over its history. This is important for jewelry, which can have a higher value, but remember that many family heirlooms only have sentimental value and wouldn’t really help if you were to sell them anyway.
Working through the process
This is just one of the misconceptions about bankruptcy, and hopefully this helps to show you how the process actually works. As you work through it, take the time to carefully consider your legal options.