One of the tradeoffs you face when filing for Chapter 7 is the potential loss of your assets. Lawyers and courts call Chapter 7 the "liquidation branch" of bankruptcy because people who use it may have to give up some of their things. If you are thinking about filing, you might wonder about which assets you could lose. Your lawyer can help you determine which assets you might have to surrender, and here are several vital things to know before filing.
You Must List All Assets on Your Filing Forms
When you file for Chapter 7, you must list many things on your filing forms. One thing you must list is your assets. You must include all valuable assets, such as your home, cars, and cash in the bank. If you own multiple homes, you must list them. If you own any other items with significant value, you must also list those. You cannot skip listing items to prevent the court from knowing because they might find out. The court will research you and your finances, and they will find hidden assets if you have any. Therefore, you must be honest when creating your asset list.
The Court Divides the Assets into Two Categories
When you create your asset list, your lawyer will talk to you about each item and its classification. Bankruptcy law uses two categories for assets, exempt and non-exempt. You can keep any assets that fall into the exempt category because assets in this category are exempt from being seized in a Chapter 7 case. If you have assets that fall into the non-exempt category, the court can seize them.
To determine which category your assets fall into, your lawyer will use various tests and measures. For example, all states have rules relating to the classification of assets. These laws allow people to keep some things when filing for Chapter 7 bankruptcy.
What You Can Keep
So, what assets can you keep when filing for Chapter 7? It depends on what you own, where you live, and the debts that you have. Every case is unique, but most people can keep most of their things. You can keep your house, for example, if you do not have too much equity in it. You must also be caught up on your payments.
If you would like to learn more about the classification of assets in a Chapter 7 case or how a bankruptcy attorney can help you, talk to a local law firm.