Chapter 7 bankruptcy is a type of personal bankruptcy that sometimes results in liquidation.
In brief, liquidation is the sale of a debtor's nonexempt property to collect funds to pay creditors.
While a bankruptcy liquidation sale sounds invasive, many Chapter 7 filings don't involve such a sale. If a Chapter 7 filer has very few assets, or most of the assets are exempt from liquidation, then a bankruptcy liquidation sale might not ensue.
To help determine whether you'll have to liquidate your assets, you may wish to speak with an attorney about the laws in your state. If you fill out the brief form below, you can connect today with an attorney in your area for a free consultation.
At first glance, you may wonder why people in debt file for Chapter 7 bankruptcy. In each of the last several years, however, around 1 million people in debt filed for Chapter 7. Recent statistics show that nearly 72 percent of all bankruptcy filings were under Chapter 7.
By filing for Chapter 7, people in debt may be able to eliminate some or all of their unsecured debts. This may sometimes require a bankruptcy liquidation sale, but several different kinds of assets are exempt from this process.
Liquidation exemptions vary by state, but most states exempt:
Thus, if people who file Chapter 7 have very limited assets, they might not have to go through a bankruptcy liquidation sale.
On the other hand, a liquidation sale may help people with more property eliminate their debts, giving them a fresh start on their financial lives.
In order to qualify for Chapter 7 bankruptcy, a person must pass the Chapter 7 means test.
This simple calculation measures your income against the median income of your state. If your income falls below your state's median income, you probably qualify. If it is above the median, additional calculations are done to see if you are eligible.
In addition to debt relief, other benefits of Chapter 7 include: