Keep in mind that when filing chapter 7 bankruptcy, you are actually commencing a liquidation process that you may not be able to readily stop. In bankruptcy a liquidation is simply the sale of your assets to pay creditors. The liquidation is conducted by the bankrutpcy court trustee who supervises your bankruptcy case.
As a Bankruptcy Petition Preparer, I help individuals and joint debtors file for bankruptcy protection under the bankruptcy code. It’s my obligation, in part, to point my clients to the bankruptcy court’s definition of Chapter 7 Bankruptcy, which according to the official Notice to Consumer Debtors on form B 201A is a liquidation process.
Bankruptcy is commonly regarded to provide bankruptcy protection for the person filing or the debtor. The “Automatic Stay” is in fact imposed immediately upon filing which prevents further collection activity from taking place.
However, The trustee of the bankrutcy estate is more mindful of protecting your creditor’s interest by surveying the landscape of your possessions to identify anything of value that can potentially be liquidated.
The trustee is trained to dig deep and prevent abuse. He can inquire not only of assets that you obviously have in your possession, but of assets that may “come your way” by means not so obvious such as a will, pending transaction, or even personal injury lawsuits in some instances.
In actuality, most chapter 7 bankruptcy filings do not result in a liquidation process but enough do that one should be concerned about.
Bankruptcy courts do offer state specific bankruptcy protection that vary from state-to-state. These bankruptcy protections are otherwise known “Exemptions”. Federal laws also offer exemptions and some states allow you to chose between both state and the federal exemptions.
The trustee of the bankruptcy estate’s goal is to conduct a liquidation process of the “non-exempt” or assets. According to the U.S. Bankruptcy Court, “the primary role of a chapter 7 trustee in an asset case is to liquidate the debtor’s nonexempt assets in a manner that maximizes the return to the debtor’s unsecured creditors”.
These bankruptcy protections allow you to protect the equity in your home, the vehicle you have paid if full, cash on hand, a savings account, and your hosehold goods and furnishings.
A chapter 7 bankruptcy filing should be taken very seriously keeping in mind the trustee’s true intentions.