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What Is A Chapter 7 Bankruptcy?


The chapter 7 bankruptcy is a liquidation of all non-exempt assets. There are two types of chapter 7 cases: asset cases and no asset cases. A no asset case is the typical consumer chapter 7 case, where all of the assets of the debtor are exempt. There are two separate groups of exemptions, one that favors real property, and one that favors personal property. The debtor has the choice of which set of exemptions they wish to use. If they are able to exempt all of their assets, the bankruptcy becomes a no asset case. It can sometimes be a no asset case, even though their assets are not completely exempt. This can happen when:

  • The liquidation value of the asset is too low for the trustee to take the time to liquidate the asset:
  • The asset is too difficult for the trustee to sell or;
  • If the trustee were to sell the asset, and the cost to liquidate it would use up all of the non-exempt equity in that asset. For example, you have a car with an $8,000 note that is worth $10,000. It would cost the trustee $1,800 to liquidate the car, netting the trustee $200. The car is not worth the trustee’s time to liquidate.

What Kind Of Debt Is Typically Dischargeable In a Chapter 7 Bankruptcy?

Almost everything is dischargeable in a Chapter 7 bankruptcy. There are specific exceptions to discharge, including student loans, taxes and divorce related debts. Taxes are only dischargeable if they are older and if they are not trust fund taxes.

What Am I Able To Keep In A Chapter 7 Bankruptcy?

In a typical consumer chapter 7 bankruptcy, you are able to keep all of the assets which are exempt. Keep in mind, there are some assets that never technically become part of the bankruptcy, and those would be your retirement (if it is under ERISA) and certain other social security and veterans’ benefits. Also, there are benefits that are specifically exempt by the statute that creates them, such as welfare and child support. Your furniture, your furnishings, your car, and your house (provided that there is not too much equity) can also be kept.

For more information on Chapter 7 Bankruptcy In California, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (916) 915-8866 today.

California Probate Lawyer Peter Cianchetta

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