1. Bankruptcy Chapters 7
When people say they are filing for bankruptcy, they are usually filing
Chapter 7. This is the most frequently filed bankruptcy chapter. It is also
known as a "liquidation" bankruptcy. Essentially, Chapter 7 liquidates
all valuable property in order to repay the debts. The court appointed
trustee will evaluate the value of a person's assets then sell them off to
repay creditors.
Trustees cannot sell assets considered "exempt property." Exempt
property typically includes clothing, household furnishings, appliances,
jewelry (up to a certain value), personal effects, like toothbrushes and
electric razors, tools of trade or profession and certain amounts of
equity acquired in a car or home.
It is not unusual for a trustee to determine a person filing for Chapter 7
does not own anything worth selling. Almost everything is considered
exempt.
Ultimately, all debts are discharged for the exception of secured debts
like car loans, mortgages, child support or student loans. Debt acquired
through fraudulent or malicious means may not be discharged. The
whole process takes about four to six months. After settling a Chapter
7 bankruptcy, a person is not eligible to file bankruptcy again for eight
years.