Many people who are considering bankruptcy are worried that filing for bankruptcy will leave them destitute and penniless. This impression tends to arise when people first start looking into bankruptcy and discover that the most common type of consumer bankruptcy, Chapter 7, involves the liquidation of a debtor’s nonexempt assets in order to pay his or her outstanding debts. When faced with the option of losing everything they own and hold dear or staying in debt indefinitely, many people often choose the latter, and their inaction results in them getting further and further into debt with no end in sight.
If this sounds familiar to you, we have some good news. You will not lose everything if you file for Chapter 7. In fact, there is a chance that you will not lose anything at all. Our experienced bankruptcy attorney is thoroughly familiar with the U.S. bankruptcy code and knows how to help his clients get the most out of bankruptcy. To schedule a free consultation with a bankruptcy lawyer, call our office today at 866-780-4855 or send us an email through our online contact form.
To understand why you will not lose anything, it is important to understand how Chapter 7 bankruptcy works. As mentioned above, the fundamental premise of Chapter 7 is the liquidation of a debtor’s nonexempt assets in order to pay off outstanding debts. Upon the completion of the bankruptcy, the debtors remaining debts are discharged (except for a few very narrow categories of debt that are generally nondischargeable).
The operative word that many people unfamiliar with bankruptcy miss in this explanation is “nonexempt.” Assets that are exempt from bankruptcy are not reachable by the bankruptcy court, which means that they will not be part of the bankruptcy estate to be liquidated. There are exemptions available for various categories of assets, and in many states, you can choose between using the exemptions available under federal law and those available under state law. While there are some unlimited exemptions, people may typically only exempt up to a certain value of assets in a given category. Types of property that usually fall within an exemption include the following:
Hopefully, this explanation and list of exemptions are making you feel a little more comfortable with the idea of filing for Chapter 7. Here’s another fact that may make you feel even better: most Chapter 7 bankruptcies are zero-asset bankruptcies, which means that the debtor has no assets that can be reached by the bankruptcy trustee. This means that the debtor files for bankruptcy, loses nothing, and has his or her debt eliminated by the court.
While the discharge is clearly the most notable benefit of filing for bankruptcy, your life can significantly improve the moment you file. This is because of the automatic stay, which is an injunction that goes into effect when you file for Chapter 7 that prevents your creditors from making any attempts at collect on debts. This means that they cannot call, write letters, repossess property, foreclose on your home, or take any other collection action. In addition, any lawsuits that were pending at the time of your filing will be placed on hold until the conclusion of your bankruptcy case. If the lawsuit was in regard to the collection of a debt, it is possible that the debt will be discharged by your bankruptcy, in which case the lawsuit will not recommence after your bankruptcy has concluded.
Your Financial Situation May Improve Immediately after the Conclusion of Your Case
Another concern that many people who are considering bankruptcy have is that it will “destroy their credit” and make it impossible for them to buy a home, car, or obtain credit for years. If you are considering bankruptcy at all, there is a good chance that you are already behind on your bills and unable to keep up. As a result, your credit is probably already poor, and unless you expect a windfall or a significant increase in your income, will continue to remain so. By taking action and filing for bankruptcy, you will eliminate most, if not all, of your outstanding debts that are showing up on your credit report as collections and obtain a fresh financial start.
While it is certainly true that your bankruptcy will remain on your credit report for years, that fact will not prevent you from buying a home, financing a vehicle, or getting a credit card the entire time it appears on your report. In fact, because creditors are aware of the fact that people who have filed for bankruptcy are typically debt free, they often are happy to extend them credit – albeit at a higher interest rate. To many people, the elimination of debts that were hanging over their heads along with a clean slate (with the exception of the bankruptcy itself) is a welcome change from the unmanageable hamster wheel of debt they were facing prior to filing for Chapter 7.
If you are in debt and are having trouble keeping up with your financial obligations, Chapter 7 bankruptcy may be able to help you. Filing for bankruptcy is a big decision, however, so you should be sure to explore all of your options and speak with an experienced bankruptcy attorney before taking any action that could affect your legal rights. If you do choose to file for bankruptcy, the assistance of an attorney can ensure that you take full advantage of all available exemptions so that you obtain the best possible available under the law. To schedule a free consultation with an experienced bankruptcy attorney, call our office today at 866-780-4855 or send us an email through our online contact form. We are qualified to represent clients in the states of Arizona, Colorado, and Nevada.
