Before you file for Chapter 7 bankruptcy, you should evaluate how it works and the effects it will have on your finances. You might also want to learn some standard terms that you will hear during your case. While there are many terms that you might need to know when using Chapter 7 bankruptcy, here are some vital ones to know.
Exempt vs. Nonexempt Property
The first terms to know are exempt property and nonexempt property. If you file for Chapter 7, this is a big deal. Your property in a Chapter 7 case falls into one of these two categories. Exempt property is the asset that you can keep when filing for bankruptcy. These are assets the court cannot touch. The court can touch and take the nonexempt property you own. Your lawyer can help you categorize the property you own before filing.
Everyone that files for bankruptcy must have a person overseeing their case. This person is a bankruptcy trustee. After filing the documents, the bankruptcy court appoints one to you. Your trustee handles every aspect of your case and communicates with your lawyer when they have questions or problems.
Chapter 7 is the liquidation branch of law that people use for relief from debt. If you want this relief, you might have to surrender assets you own. Courts call this liquidation. They take your nonexempt property, sell it, and repay the creditors you owe money to when you file. Some people do not have to surrender any assets, but others do. It depends on what assets a person has when they file.
Secured vs. Unsecured Debt
In Chapter 7, the courts divide debt into two categories. The first category is secured debt, and these are the debts that you will still owe after completing your bankruptcy case. Unsecured debt is the type that the court forgives through Chapter 7. There are some variations and exceptions to this, and your lawyer can explain more.
When you keep a secured debt with a loan while filing for Chapter 7, the court requires a reaffirmation agreement. This agreement is between you and the lender, and it allows you to keep the asset by agreeing to repay it.
As you proceed with your case, you will know what is going on if you understand these terms. If you have questions about filing for bankruptcy, speak with a Chapter 7 bankruptcy attorney in your area.