Chapter 7 allows someone with more debt than they can repay to wipe those debts out. This usually happens when someone loses a job, goes through divorce, or gets sick.  Many times there is a combination of those factors.  There’s no reason to feel bad about filing bankruptcy.  In fact, the laws were created for people to have a “safety net” for these types of situations.

A common misconception is that if you file for bankruptcy you will lose everything you own.  This is almost never the case. The goal of the bankruptcy system is literally to give an “honest debtor” a fresh start.  If that’s the goal, it simply doesn’t make sense to make you sell your home or your car, or to liquidate your retirement plan. In a Chapter 7, the bankruptcy court assigns a court trustee whose job is to collect and sell “nonexempt” property. Proceeds from the sale of these items are then distributed to creditors. In almost all cases, the trustee will not sell anything because almost all assets are exempt from being sold.

Creditors will only be paid if a case is an “asset case”.  An asset caseexists when the individual filing for bankruptcy has assets that aren’t exempt. Whether an asset has “value” is complicated and you should always seek expert advice to ensure your property is not in jeopardy.

Certain types of debt cannot be discharged with a Chapter 7 filing.  These types of debts include some types of taxes, student loans, child support or alimony, or debts arising out of criminal acts. Understanding the types of debts that might not be dischargeable, as well as knowing the situations that could lead to debts not being dischargeable, requires expert advice.

At Kelley & Clements, we’re dedicated to helping you navigate the complexities of different types of bankruptcy. Regardless of your financial situation, our attorneys can help you find a solution that works for you and your family.

Contact us to learn more about your options, or make an appointment to meet with one of our expert attorneys today.