Do you have to sell everything in Chapter 7?

| May 2, 2021 | Bankruptcy |

If you have substantial debt, you may have considered filing for bankruptcy. Chapter 7 bankruptcy is a great option for those who need a fresh start.

Many people worry that they will lose all their belongings under Chapter 7. In California, however, there are many exemptions that allow you to keep much of your property.

State exemptions

California allows you to keep property that is essential to living and earning wages, including your home, furniture, vehicle and trade tools. These exclusions come with monetary and other limits. For example, you may only keep a specific portion of your home equity.

You can choose one of two options, either 703 exemptions or 704 exemptions. With each option, the type of assets and limits will vary. Many homeowners with significant equity typically prefer 704 as it allows them to retain more of their home’s equity.

For couples filing jointly, you may only claim an exemption once.

Federal exemptions

If you file for bankruptcy in California, you must use the state exemptions when you file for bankruptcy. However, you might still qualify for federal options under certain conditions. If so, you may have greater protection for some of your assets.

Among those eligible are:

  • Government employees
  • Military members
  • Social security recipients
  • Railroad workers

Additionally, some people who receive disability, retirement, or survivor’s benefits may also be eligible.

Because of the many nuances of Chapter 7, the idea of filing for bankruptcy may intimidate you, but with the right legal advice, you can easily free yourself of debt without losing your most cherished belongings.