Does filing Chapter 7 mean you will lose everything you own?

On Behalf of | May 26, 2021 | Debtors |

One reason people are sometimes slow to file for Chapter 7 bankruptcy is that they know it means they have to liquidate their assets. They believe this means they’ll lose everything they own, which sounds worse than having debt they can’t afford to pay off. 

But is this what will happen? Do you really have to sell everything if you file?

There are many bankruptcy exemptions

You will not lose everything. If you did, bankruptcy wouldn’t work and wouldn’t provide a fresh start at all. The goal is to sell off the unnecessary assets that you own and to give you exemptions that allow you to keep what you do need. Examples of these include:

  • Vehicle exemptions
  • Homestead exemptions
  • Personal property exemptions
  • Wildcard exemptions

For instance, perhaps some of your personal property includes items that you use in your profession — your tools of the trade, so to speak. If you lost them, you would lose the capacity to continue earning a living entirely. You can typically keep things like this to maintain your career. Another example is allowing you to keep your primary vehicle so that you can still go to work. 

Understanding the bankruptcy process

You can see from this that it’s important to really understand the legal process of bankruptcy and what it allows. Never assume that it’s going to work a certain way, even if you’ve heard plenty of rumors or myths from others. Take the time to sort facts from fiction and make the best choice you can for yourself and for your future goals. An experienced attorney can guide you through the process.