Chapter 7 Bankruptcy

Chapter 7 bankruptcy is often called a liquidation bankruptcy, as opposed to Chapter 13 where the debtor must make monthly payments into the bankruptcy for up to 5 years. Chapter 7 bankruptcy allows the debtor a “fresh start” without the burden of making any payments to the court for distribution to unsecured creditors. The risk in filing for Chapter 7 relief is the possibility of liquidation of your assets. The Trustee that is assigned to oversee your Chapter 7 case is in charge of determining whether you own any “non-exempt assets” which he/she can sell for money to distribute to your creditors. Many Chapter 7 cases are “no asset cases” in which the Trustee determines that there are little or no non-exempt assets worth selling. If you do have non-exempt assets that are reasonably valuable, you could be at risk of losing these assets in a Chapter 7. It is therefore important to know which assets are exempt and which are not. It may also be the case that one or more of your assets is partially exempt. This can happen on occasion because Utah’s Bankruptcy exemptions are set at certain amounts, so if the value or equity in the particular asset is above the exemption amount, the Trustee could sell the property, pay you back the exemption amount, and use the rest to pay creditors.

Here is a list of important exemptions:

A Chapter 7 case may be the better alternative for you if you think that you have few, if any, non-exempt assets, or if you have below the exemption amount of equity in your home or vehicles. It is also important to remember that the value of your assets is not what you originally paid for them, but what they could be sold for at auction. Thus, your electronics, which are most often non-exempt, depreciate a lot with the passage of time. Barring any complications or fraud, you will receive your discharge in a Chapter 7 case about 4-6 months after filing. A discharge means that your unsecured debts are eliminated. It is important, however, to remember that some of your debts are secured debts, meaning that those particular creditors have a secured interest in your property, like your home, your vehicle, or furniture and electronics purchased at RC Willey, Best Buy or Rent-A-Center. These debts can be eliminated, but if you choose not to continue payments to these creditors, they have the right to repossess, confiscate, or foreclose. If you do decide to surrender the collateral, any deficiencies (the difference that may still be owing after your property is sold at auction for less than what you owed) will also be eliminated when you receive your discharge. However, if you elect to “reaffirm” such debts, meaning you wish to keep the house or car and continue to make regular payments, only to later default, any remaining debts will still be owed because you reaffirmed that particular debt.

Advantages of Filing a Chapter 7 Bankruptcy

Disadvantages of Filing a Chapter 7 Bankruptcy