Understanding Chapter 7 bankruptcy

If you’ve taken on more debt than you can handle and it seems like there’s no end in sight, you may want to consider filing for bankruptcy. In the state of Wisconsin, there are different types of bankruptcy that a person can file for. One of the most commonly filed forms of bankruptcy is Chapter 7.

What is Chapter 7 bankruptcy?

Chapter 7 bankruptcy involves the individual having many of their assets sold off to repay their creditors. The person’s assets are put into two different categories called exempt assets and non-exempt assets. Exempt assets are the ones that you are able to keep after bankruptcy. Non-exempt assets are sold off so that your creditors can have the proceeds to pay off your current debts.

What are non-exempt assets?

Under Chapter 7 bankruptcy, there are various types of non-exempt assets that will be sold off to help a person pay down their debts. Some common examples of these include secondary residences, newer-model vehicles, non-retirement investments and other valuable items that you own. Once these assets are sold, the judge will decide how the proceeds are divvied up between your existing creditors to pay off your debts.

What are exempt assets?

While it might be common to think that all of your assets will be sold off during a bankruptcy, that’s not the case. There are certain exempt assets that you need to live or to work that will not be sold. Some examples of these include your house, retirement accounts, furniture, tools for your profession and a car to travel to and from work.

Making the decision to file for bankruptcy is a big one. It’s important that you understand the various different types of bankruptcy and what’s involved throughout the process. An attorney may help prepare you both financially and emotionally to handle the process.