In 2016, more than 6,600 Nevada residents filed for Chapter 7 bankruptcy, according to official numbers from the U.S. Bankruptcy Court in Las Vegas. Chapter 7 allows individual debtors to wipe out the majority of their debts and get a fresh start. If you are dealing with an insurmountable pile of unpaid credit card bills, medical bills, or even business debts, Chapter 7 may be your best bet for rebuilding your life.
How Chapter 7 Works
Chapter 7 is known as a “no-asset” bankruptcy. Basically, once you file for bankruptcy, a court-appointed trustee takes a look at your assets. Some assets are exempt from creditor collection and exempt from the bankruptcy. You get to keep them. Any non-exempt assets can be used to pay off your creditors as much as possible. Most debtors filing Chapter 7 no-asset cases have few if any non-exempt assets. Any remaining debt is then discharged—or canceled by the bankruptcy court—consistent with federal and state law.
In many cases, debtors have few, if any, non-exempt assets, meaning they will keep most of their property in a Chapter 7 case. The actual exemptions are specified in Nevada law. While the federal bankruptcy code contains a separate list of exemptions, Nevada residents must use the state exemptions.
The Nevada Chapter 7 bankruptcy exemptions include:
- 75 percent of your weekly “disposable” earnings or 50 times the federal minimum wage (currently $7.25 per hour);
- The equity you own in your home (including a mobile home) up to $550,000;
- Furniture and household goods up to $12,000 in value;
- The equity you own in one car or personal vehicle, up to $15,000;
- Any Social Security payments, including retirement or disability benefits;
- Any court-ordered payments for spousal maintenance or child support;
- All proceeds you received under a life insurance policy; and
- $1,000 of any personal property not covered by any other Nevada exemption.
What Debts Are Not Discharged in Chapter 7?
Chapter 7 eliminates your liability to pay most debts. But if the debt was secured by property, such as your house or car, you must still pay that debt if you want to keep the asset. In other words, you cannot file for Chapter 7 bankruptcy, discharge your mortgage, and keep your house. You will need to either surrender the house to the bank or reaffirm the debt, meaning your liability continues even after the bankruptcy discharge.
There are also certain kinds of debts that normally cannot be discharged in Chapter 7. Federal law expressly declares the following debts as “non-dischargeable”:
- Unpaid back child support or alimony;
- Personal injury and wrongful death judgments arising from the debtor’s drunk driving;
- Student loans made or guaranteed by the federal government; and
- Income tax debts incurred within the past three years.
A qualified Nevada Chapter 7 bankruptcy attorney can advise you on how specific exemptions and categories of non-dischargeable debts may affect your situation. Bankruptcy is a highly technical area of law. It is never a good idea to represent yourself or file for bankruptcy without an attorney’s assistance.