When you file for Chapter 7, or liquidation bankruptcy, the court-appointed trustee will typically sell any property with a value greater than the exemption for that category of property. You get to retain some of your belongings, including clothing and other personal effects, some household goods and furniture, and possibly your home. You may be permitted to retain a vehicle. Almost certainly, the trustee will sell all collectibles and heirlooms.
Even if you are compelled to give up prized possessions, certain debts remain. You will continue to owe child support payments, whether they are current or in arrears; alimony payments; some back taxes and the majority of student loans; and the bankruptcy trustee's fees, filing fees, and all attorney fees incurred during Chapter 7 or Chapter 13 bankruptcy. There are 19 categories of debt that cannot be eliminated or discharged in a Chapter 7 bankruptcy. A few categories of debts that remain after a Chapter 7 bankruptcy are dischargeable if you instead file for Chapter 13 bankruptcy.
To qualify for Chapter 7 or Liquidation bankruptcy, a """"means test"""" must be passed. If you have a regular source of income and own property, Chapter 13, Adjustment of Debts of Individuals with Regular Income, may be a preferable option for you. Chapter 13 requires the development and filing of a budget that includes a schedule of debt-reduction installments. If you wish to retain your home and other belongings, your budget must demonstrate how you will bring these payments current within the allotted five-year period. After the court approves your plan, you will continue to own any property that you do not sell. Your actual payments are made to the trustee, who then distributes the funds. When all payments required by the bankruptcy payment plan have been made, the court discharges your debts.
As soon as the bankruptcy court discharges your debts, all debts included in your bankruptcy petition are eliminated. Typically, Chapter 13 bankruptcy eliminates more debts than Chapter 7 bankruptcy. In Chapter 7 bankruptcies, however, debts are typically discharged in as little as three months. In Chapter 13 bankruptcies, debt discharge can take up to five years.
If you are contemplating bankruptcy, you should thoroughly educate yourself on the advantages and disadvantages of each option. You will then be able to determine the optimal course of action.""
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