Chapter 7 bankruptcy is geared toward individuals who have a high amount of unsecured debt that they are unable to keep up with. It allows those going through this bankruptcy process a way to quickly get rid of many debts to get back on the road to meeting financial obligations.
Chapter 7 is the preferred form of bankruptcy for many, as it allows a debtor to remove the majority of their debts without being obligated to repay their various creditors. Additionally, debtors going through this process are typically allowed to keep the majority of their existing assets. These assets are treated as exempt from the bankruptcy estate, while non-exempt property may be used to pay back creditors. Assets that are typically treated as exempt are those that are considered necessary for modern life.
The intent of bankruptcy is to get debtors out of debt and back to productive financial lives. Allowing them to keep property that is necessary for work and their personal life helps them move toward that goal. Exempts property includes items such as cars, home appliances, pension benefits, furniture, clothes and home equity, among other items. Property that is typically treated as non-exempt includes collector’s items, bank accounts and a second vehicle or home, as these items are often thought of as more than necessary.
Anyone considering filing for bankruptcy should be aware of the various forms of bankruptcy, as well as the obligations and long-term outlook associated with each. Chapter 7 is the most desired form for those looking to get out of debt quickly while retaining much of their existing property. However, debtors should be aware that there are certain items that they will not be permitted to keep out of the bankruptcy action.
Source: FindLaw, “Exempt vs. Non-exempt Property Under Chapter 7,” accessed on June 14, 2015