Chapter 7 bankruptcy is actually a fairly simple process. If you have a lot of outstanding debt that you cannot pay off, bankruptcy allows a trustee to sell your non-exempted assets (a process known as liquidation) and then distribute the proceeds to your creditors in exchange for having all unsecured debts discharged. This means you will be required to create an accurate and detailed asset disclosure at the outset of the process. However, what happens when you have very few assets to your name?
When you choose to file for Chapter 7, you must first qualify, which means passing a means test. However, those with few assets to their name and a lot of debt will usually have no trouble doing so. When this is the case, you will be given the ability to exempt a portion of what assets you have (such as your car or home) and then the remainder will be sold off to satisfy your creditors.
However, if you have nothing left after your exemptions are made, then there's nothing for your trustee (the person placed in charge of selling your assets and paying your creditors) to sell. When this is the case, you don't really have anything your creditors can take, so your debts are discharged without loss.
What Assets Are Liquidated?
Seem too good to be true? That's probably because you're not fully aware of just how many assets can be taken and sold as part of the bankruptcy process. Assets come in many different shapes, sizes, and forms, including possessions, bank accounts, retirement accounts and savings, and more. The laws governing each of these things vary, so you'll want to have an attorney review your standing with you before you make your decision.
However, assets can also include any outstanding debts you are owed, meaning any money someone owes you could be seized as part of the process and it will instead go straight to your trustee and off to your creditors once it is paid.
This shows the importance of using your exemptions strategically. Depending on how you file bankruptcy, what assets you own, and how they are managed, you may be able to protect a good amount of what you have and leave very little to be liquidated.
However, being able to declare bankruptcy without losing anything you own is exceedingly rare and you probably won't be able to exempt everything. This means you should speak with a Richmond bankruptcy lawyer as soon as possible when you are considering bankruptcy as an option.
Attorney Bruce W. White has helped thousands of clients regain their financial independence through help with the bankruptcy process and careful guidance through the legal system. With more than 30 years of experience practicing bankruptcy law to his name, Mr. White has earned a reputation for his high-quality counsel and professional conduct that strives to help good people get out of bad situations. He handles every case personally, and provides you with individualized and respectful attention your issue deserves.For a free consultation or to learn more about the bankruptcy process, call Bruce W. White, P.C. today by dialing (804) 655-0502.