Gavel next to the scales of justiceIn this type of bankruptcy, also known as "straight bankruptcy," the trustee who is in charge of collecting payment from you will take your non-exempt assets and sell them at auction. Any money made from these sales will then be distributed to your creditors on a percentage basis. The good news is that many of your debts will be taken care of, while many of your assets can be exempt from this process such as the equity in your vehicle (up to $7,500.00), your home, most household goods and furnishings, retirement plans, and a wide variety of other assets. When you come out of this bankruptcy you will be allowed to keep your cars and your home, even if there are liens against them, as long as your payments are current.
It's important to know that there is a complicated "means test" that was established in the most recent bankruptcy amendments, which limits the income level an individual can earn while still being allowed to file for Chapter 7 bankruptcy. If filing for Chapter 7, you must be able to pass this test. If you are wondering if filing for Chapter 7 bankruptcy is right for you, be sure to work with an attorney who is knowledgeable of the changes in bankruptcy law and experienced in the use of the "means test" to determine your eligibility.