Reference - Chapter 7 Bankruptcy
The most common type of Bankruptcy that is filed for is Chapter 7
Bankruptcy. This is a liquidation bankruptcy rather than a
reorganization bankruptcy. This means that assets will be sold to clear
the debt or debts.
It starts by the person in debt listing their assets. With Chapter 7
Bankruptcy the debtor is allowed to keep what is called "exempt"
property. Examples of exempt property are
a certain amount of home equity
a small amount of vehicle equity
small allowance for clothing
small allowance for other personal items.
The value of these exempt properties differs depending on what
jurisdiction you file for Chapter 7 Bankruptcy in.
A trustee will be appointed who will gather the debtors assets ready
for sale. The proceeds will then be distributed to creditors according
to priority. Even after declaring Chapter 7 Bankruptcy there are some
debts that will still be require to be paid off. These are called
non-dischargeable debts and some examples are
child support
student loans
DWI fines or penalties
taxes.Secured debts are those where the creditor has an interest
in the property of the person filing for bankruptcy. It may be that the
loan was used to purchase the property. Secured debts take priority over
non-secured debts. If the sale of the property is insufficient to repay
the secured debt then the remained of the debt becomes classed as a
non-secured debt.
Non-secured debts are the last debts to be cleared off in bankruptcy
proceedings. They may even end up completely discharged if there are not
enough assets. This is what happens in many Chapter 7 Bankruptcy cases.
An example of a non-secured debt is a credit card debt.
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