California residents who are thinking of filing for bankruptcy are likely feeling overwhelmed at what lies ahead. With so many questions about what happens during the process and what items may be taken away from you, it’s important to stop and take the time to learn about the process. For most people, filing for Chapter 7 bankruptcy is the best option.
What is Chapter 7 bankruptcy?
Chapter 7 bankruptcy essentially consists of liquidating all of your non-exempt assets and taking the proceeds to pay off your creditors. If there are not enough proceeds to pay off all of the debts that you owe, a judge will take care of the dispersion of the proceeds and legally dismiss certain debts that you owe. One of the scariest parts about filing for Chapter 7 bankruptcy is understanding what assets you get to keep and which assets are sold.
Exempt vs. non-exempt assets
During Chapter 7 bankruptcy, you’ll hear two main terms, which are exempt and non-exempt assets. Exempt assets are ones that you get to keep, and non-exempt assets are the ones that must be sold to pay your creditors. Exempt assets tend to include necessary personal property to live and work. Some common examples are your primary home, your car, your clothing, furniture and tools that you use at your job. The trustee assigned to your bankruptcy case will be responsible for determining which assets are exempt and which ones are non-exempt.
Filing for bankruptcy can be a scary process to start out with. Once you understand the various components that are involved and what will be expected of you throughout the entire process, it can help to put your mind at ease. It’s a good idea to always consult an attorney before you decide whether or not the bankruptcy process is in your best interest.