Chapter 7 Bankruptcy, also sometimes called liquidation bankruptcy, could be an option to help you reset your finances and help get back on your feet. But what is it exactly? It’s a process that will clear all your unsecured debts. Unsecured debts are any debts that have no collateral or property attached to them.
Credit card debts, medical bills, and personal loans are all common examples of unsecured debts. A Chapter 7 Bankruptcy can alleviate these debts.
So what’s the catch? You could lose assets. The trustee assigned to your case will review all of the assets you disclosed in the paperwork you filed. They will determine if you have any assets that can be sold to pay back your creditors. However, there are exceptions to this rule. Most states have exemption rules that will protect some of your assets such as cars, retirement accounts, and household goods. However, any assets that don’t fall into these categories could be removed from your custody to pay back your creditors.
This is just a brief overview of Chapter 7 Bankruptcy. There are many pros and cons to this process that are listed in the following video.