Personal Bankruptcy Questions

One of the questions that often come up regarding bankruptcy is what can be taken away from you if you file Chapter 7 bankruptcy. For example, if you have unpaid credit card bills and other kinds of unsecured debt, will bankruptcy take care of these? If so, will you have to surrender your personal belongings such as your car (or even worse, your house) in order to cover these costs?Well, if you successfully file Chapter 7 bankruptcy, then the previous debts like credit card bills can be wiped away. Technically, Chapter 7 bankruptcy is known as liquidation because you’ll have to liquidate any nonexempt assets in order to help cover the costs of your unpaid bills. The truth is, however, that most people who file Chapter 7 don’t have much in the way of assets. So, this is really a moot point.

Your home and car are usually protected from creditors, though there are specific rules that vary according to your state. Of course, you still have to continue making your mortgage and car payments if you want to keep those assets. The lien holders on your property (such as the car company and the bank) can still take away your property if you don’t pay your bills.

The point is that bankruptcy keeps other creditors, like credit card companies, from going after these assets. If your state has a homestead exemption, then the credit card companies cannot take your house or force you to sell your house in order to pay off that debt. That is why these financial obligations are called unsecured debts, because you don’t have any collateral involved in case you didn’t pay the debt.

What if you don’t qualify for Chapter 7 bankruptcy? Well, in that case you may still qualify for Chapter 13 which provides a repayment plan for you to follow over the next three to five years. This is often used to catch up on your mortgage payments because most families would obviously prefer to keep their house. Chapter 13 is one more option that allows families to catch their breath so to speak and get back on top of their financial obligations.

If you’re considering bankruptcy, you should always consult a bankruptcy lawyer (and perhaps a financial advisor) so you understand all of your options before making a final decision.

Click here for more information on unsecured bankruptcy debts.