WILL I LOSE ALL MY PROPERTY?

 

Federal and state law protects many kinds of personal property, including household goods and furnishings, clothing, retirement funds, tools used for work, pets and MUCH more. Talk to Attorney Patty Edwards about any property concerns you have.

Secured property or debt is property that you possess that is backed by collateral, i.e., a house or vehicle. If you intend on keeping that property, you will have to continue making payments on the loan or pay the full price to purchase the item. If you are behind on secured payments, you may be able to catch up on those back payments through the bankruptcy process. This could be a deciding factor when choosing between a Chapter 7 or Chapter 13 bankruptcy.

 

HOW LONG DOES CHAPTER 7 BANKRUPTCY TAKE?

 

The beginning of bankruptcy process is dependent on the responsiveness of the client. If you are committed to filing bankruptcy and you get all the necessary information to your attorney in a timely fashion, the actual filing can be completed quickly.

The typical Chapter 7 bankruptcy takes three to four months from the time it is filed with the Court until your discharge is received and all debt released.  Afterwhich, you can obtain a fresh start.

However, your case might take longer if the trustee asks you to submit additional documents, the trustee has to sell your property to repay creditors, or a creditor objects to your discharge.

 

WHAT DEBTS ARE DISCHARGED IN CHAPTER 7 BANKRUPTCY?

 

A Chapter 7 bankruptcy will generally discharge your unsecured debts, such as credit card debt, medical bills, unsecured personal loans and collections on judgments. The court will discharge these debts at the end of the process, generally within 90-120 days of filing the bankruptcy petition.

Some types of unsecured debts are not usualy discharged through a Chapter 7 bankruptcy, including:

• Child support (additional wage garnishments can be stopped…click here for more information)
• Alimony
• Student loans (but you might ease the financial stress and the burden…click here for more information)
• Court fees and penalties
• Some tax debt (there are contingencies that must be met…click here for more information)
• Personal injury debt incurred due to an accident while you were intoxicated

Your creditor could also object and keep certain debts from being discharged. If you make a purchase totaling $800 or more that is NOT for health, safety and welfare of the debtor or debtor’s family, it may be seen as a luxury purchase. Your credit card company can challenge or object to the discharge of that item or items, and you may remain responsible for the repayment of the debt. Some examples of “luxury” purchases and services include fur coats, name-brand purses, jewelry, home furnishings, makeup, hair products, manicures, plane tickets, vacations, salon services, alcohol and electronics.

Additionally, a Chapter 7 bankruptcy may discharge the debt you owe on secured loans. Secured loans are those backed by collateral, such as a home mortgage, or when a creditor has a lien on your property. However, even if the debt is discharged, the creditor may still have the right to foreclose on or repossess your property. If you have decided not to keep your home, the debt will be discharged, and you will be allowed to remain in the home until the bank completes the foreclosure process.

 

WHAT DO YOU LOSE AND WHAT CAN YOU KEEP IN CHAPTER 7 BANKRUPTCY?

 

If you file for Chapter 7 bankruptcy, you may lose any property that has a lien on it and any property you offered as collateral for a loan if you stop making the payments. However, exemption laws protect your property. Anything you own that is worth less than an available exemption is considered exempt property. You can keep all exempt property. 

Bankruptcy exemptions are laws that allow bankruptcy debtors to protect property from creditors. Both federal and state bankruptcy exemptions exist. These exemptions allow debtors to exclude certain property from the bankruptcy estate up to a certain dollar amount in value.  

The federal bankruptcy exemptions are listed in the United States Bankruptcy Code. The federal bankruptcy exemptions currently provide a wildcard exemption in the amount of $1,475 and up to an additional $13,950 of any unused homestead exemption that can be used to protect any property of your choosing. Wildcard exemptions allow you to apply all or a portion of the exemption to an item that belongs in another category, or no category at all. They are a catch-all category of exemptions that benefit the person filing for bankruptcy.

Examples of exempt property based on current federal limits for an individual include: (These numbers apply to cases filed between April 1, 2022 and March 31, 2025.)

• • A homestead exemption of $27,900 as an individual (If you do not own real property or do not need to protect equity in your home, you are allowed to use up to $13,950 as additional wildcard exemption for other property.)
  • Up to $4,450 on a vehicle
  • Up to $1,875 in jewelry
  • Up to $14,875 in personal property, such as books, household goods and furnishings, musical instruments, animals and clothes ($700 per individual item limit, but you can apply wildcard exemption money here)
  • Funds in tax-exempt retirement accounts, such as a 401(k) or 403(b) accounts, and up to $1,512,350 in combined savings in IRAs and Roth IRAs
  • Public benefits: such as social security benefits, veterans’ benefits and unemployment benefits
  • Up to $2,800 in tools of trade, including implements
  • Alimony and child support
  • Certain insurance benefits

For married couples, filing jointly, many of the above-listed amounts are doubled. 

 

HOW LONG DOES A CHAPTER 7 BANKRUPTCY STAY ON YOUR CREDIT REPORT?

 

A Chapter 7 bankruptcy may help relieve you of your obligations, but it will impact your credit for year. However, if you have been behind on payments for a while, you have any judgments against you, or your wages are being garnished, your credit has already suffered tremendously. Accounts included in a bankruptcy filing will no longer be reported as “unpaid or past due,” allowing you to rebuild financial security.

The Chapter 7 bankruptcy record can stay on your credit report for up to 10 years from the filing date, and a completed Chapter 13 bankruptcy can remain on your credit report for seven years from the filing date.