One of the main questions people ask when filing for Chapter 7 is whether they will lose their assets. After all, Chapter 7 offers a discharge of debts in exchange for the assets you own. As a result, lawyers call this the "liquidation branch" of bankruptcy law. The truth is that you could lose some of the things you own, but some people do not lose any assets. It depends on your case and situation, and here are several things you might want to know about this before filing.
Lawyers Classify Assets as Exempt or Non-Exempt
The first thing to realize is that your lawyer will look closely at the things you own to classify them. Bankruptcy lawyers use two categories for assets: exempt and non-exempt. The goal is to try to exempt as many assets as possible, as you get to keep all your exempt assets. The court might take assets that fall into the non-exempt category, but they cannot touch your exempt assets. Your state has rules that dictate what assets you can exempt, and your lawyer can tell you more about this before you file.
Your House Might Fall into Either Category
If you own a home, you might wonder what will happen to it if you file. Can you exempt your home in a Chapter 7 case? In most cases, people can keep their homes, but this is not always the case. It really depends on how much equity you have in the house. It also depends on your state's exemption laws. If you do not have a lot of equity, you will likely get to keep the home.
Assets You Might Lose
Cash is the number one asset you might lose if you file for Chapter 7. If you have cash in the bank, the trustee can take it from you. The trustee can also take your next tax return, as this represents cash that you expect to receive.
Is Your Case an Asset Case or No-Asset Case?
The bottom line is that your lawyer will help you determine if you have an asset case or a no-asset case. If you have an asset case, you stand to lose things you own. If you have a no-asset case, it means that you do not have any assets the court can take. A Chapter 7 bankruptcy lawyer can help you determine if you should use this branch of law for debt relief.
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