Chapter 7 Bankruptcy FAQ

Questions:

• What is Chapter 7 bankruptcy?
• I've heard it's harder to qualify for Chapter 7 bankruptcy now. Is this true?
• Will all of my unsecured debts be wiped out in Chapter 7 bankruptcy?
• If I'm current on my mortgage, can I keep my home in a Chapter 7 bankruptcy?
• I don't own a home, but will I have to give up other property if I file for Chapter 7 bankruptcy?

Answer:

I don't own a home, but will I have to give up other property if I file for Chapter 7 bankruptcy?

In some cases, the bankruptcy trustee may sell some of a Chapter 7 debtor's property in order to repay unsecured creditors. However, bankruptcy law in all states allows debtors to keep a certain amount (or certain types) of property -- called "exempt" property. Most states exempt things such as vehicles (up to a certain value), reasonably necessary clothing, reasonably necessary household furnishings and goods, household appliances, personal effects, pensions, tools of your trade (up to a certain amount), home equity (up to a certain amount), and public benefits. Because of the extensive list of exemptions, most debtors end up keeping all or most of their property. To learn more about what property you may or may not keep in Chapter 7 bankruptcy, see Nolo's article When Chapter 7 Bankruptcy Isn't the Right Choice.

To Learn More

For more information on the Chapter 7 bankruptcy process, see How to File for Chapter 7 Bankruptcy, by Stephen Elias, Albin Renauer and Robin Leonard (Nolo).