Chapter 7 Bankruptcy

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Chapter 7 Bankruptcy Information

A Chapter 7 Bankruptcy provides for the sale of a debtor's nonexempt property and the distribution of the proceeds to creditors.

A Chapter 7 Bankruptcy case does not involve plan of repayment as you would find with a Chapter 13 Bankruptcy. Instead, the bankruptcy trustee gathers and sells the debtor's nonexempt assets and uses the proceeds to pay back creditors in accordance with the provisions of the Bankruptcy Code.

Under a Chapter 7 Bankruptcy, part of the debtor's property may be subject to liens and mortgages that pledge the property to other creditors. In addition, the Bankruptcy Code will allow the debtor to keep certain "exempt" property; but a trustee will liquidate the debtor's remaining assets. Accordingly, potential debtors should realize that the filing of a petition under chapter 7 may result in the loss of property.

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What property is exempt under a Chapter 7 Bankruptcy?

Property exemptions under a Chapter 7 differ from state to state under the U.S. Bankruptcy Code, but they can include:

  • Motor vehicles, up to a certain value
  • Reasonably necessary clothing
  • Reasonably necessary household goods and furnishings
  • Household appliances
  • Jewelry, up to a certain value
  • Pensions
  • A portion of the equity in the debtor's home
  • Tools of the debtor's trade or profession, up to a certain value
  • A portion of unpaid but earned wages
  • Public benefits — including public assistance (welfare), social security and unemployment compensation — accumulated in a bank account
  • Damages awarded for personal injury

As with most legal matters, each case is different. To get answers to your bankruptcy questions, call Michigan Legal Group. The initial consultation is free and we are here to help.

 

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