The same can be true for bankruptcy, and there’s one misconception about Ch. 7 bankruptcy that I’d like to lay to rest. When you google a Chapter 7 bankruptcy, the word “liquidation” comes up almost immediately, and I often get asked “Isn’t that the liquidation type of bankruptcy? Won’t I lose everything? I have?”
In short, yes, Chapter 7 is a liquidation type of bankruptcy, but no, you will not lose everything you own. Let’s break that down.
“Liquidation” Does Not Mean You Will Lose Everything You Own!
It’s true that Chapter 7 bankruptcy is sometimes called a “liquidation” bankruptcy, and I get it, the word “liquidation” is pretty scary! It’s the kind of word that evokes images of all the things you’ve worked for dissolving in front of your eyes. But just because “liquidation” is sometimes used to describe Ch. 7 bankruptcy, doesn’t mean that you’ll have to liquidate everything you own but the kitchen sink to pay your debts.
Let me give you some peace of mind: you’re not required to give up everything you own when you file a Chapter 7 bankruptcy. There are laws that protect the things you own. Those laws are called exemptions. Exemptions protect your things up to a certain cash value. If the entire value of a piece of property is under the cash value set by the exemptions, they property is “exempt,” meaning it’s protected from any sort of liquidation.
These exemptions apply to all kinds of things, from your kitchen appliances and your wardrobe, to your vehicles and home equity. For many, many people, the exemptions cover everything they own, and all of their property is protected from any sort of liquidation.
Before you get too anxious about what you may read online about bankruptcy, speak to a bankruptcy attorney and have your concerns addressed. If you have questions about bankruptcy and would like to do a free consultation to go over your options, visit www.lifebacklaw.com to speak with an attorney. You will be glad you did!