Personal bankruptcy protections serve as an important resource for individuals struggling with debt who are seeking a fresh start. Chapter 7 bankruptcy is one type of personal bankruptcy that may allow the filing party to liquidate their assets to repay creditors.
It is important to understand that Chapter 7 bankruptcy does not require the filing party to start from scratch following their bankruptcy. Understanding that some types of property are exempt from the bankruptcy process may help quell some anxiety the filing party may feel concerning the process. Once a Chapter 7 bankruptcy filing has been made, an automatic stay also goes into effect that prevents creditor collection actions during the process.
During the Chapter 7 bankruptcy process, the filing party will liquidate non-exempt assets to repay creditors. Certain categories of property may be exempt from the process through either federal or state exemptions. Property that may be exempt can include vehicles up to a certain value; the equity in a home up to a certain value; jewelry up to a certain value; reasonably necessary clothing; reasonably necessary household goods and furnishings; household appliances; pensions; damages from a personal injury award; tools of the filing party's trade up to a certain value; and a portion of unpaid but earned wages.
The Chapter 7 bankruptcy process is an important resource for those struggling with debt, but it can be complicated to understand. Because of the importance of this protection for consumers, it is essential that they be aware of its benefits, how it works and how it may help them.