The idea of filing for Chapter 7 bankruptcy may frighten you because Chapter 7 is a form of liquidation. While you want to escape your debt burden, you also do not want to lose everything you own. The good news is that filing for Chapter 7 does not mean you lose your possessions. In fact, you might not even lose anything you own at all.
The idea behind bankruptcy is not to ruin you, but to enable you to deal with your debt and make a fresh financial start. Nerdwallet explains that people who file for Chapter 7 have options available under the law that allow them to keep certain possessions.
Under both federal and state law, a person who files for Chapter 7 bankruptcy may exempt some assets from liquidation. This means you have the opportunity to designate some of your belongings as exempt so that a bankruptcy trustee does not sell them off to repay your debts.
Generally, these are assets essential to your everyday living. So a Chapter 7 bankruptcy should not mean that you lose your house or your automobile. Since the exact items that qualify for exemption will depend on state law, you may need to do some checking on state regulations to see what you can exempt.
You might not even lose assets not considered eligible for exemption. For one thing, you might own assets that a creditor already has a claim on because of a lien or a loan. More likely, many of your assets might not be worth anything to a creditor. Many common possessions like appliances or electronic devices are so old or used that your trustee could not sell them for any useful amount of money.
No asset cases
As the Nerdwallet article points out, a large majority of Chapter 7 cases are actually no asset cases. It may come as a surprise, but many people who go through Chapter 7 bankruptcy retain all of their possessions. So it is possible to go through Chapter 7 and retain everything you have, but it will depend upon the particular circumstances of your case.