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What do I get to keep if I file for Chapter 7 bankruptcy?

Chapter 7 bankruptcy is touted as a “fresh start” that allows someone to erase a significant portion of debt that probably cannot be paid based upon the debtor’s current income and financial circumstances.

In fairness to creditors, anything of value that the debtor has is turned over to the court to sell, with the proceeds used to pay off eligible debts. This fact makes many people who would otherwise consider bankruptcy to not do so out of fear of losing things like cars or even their home.

In reality, bankruptcy law “exempts” some property, meaning that the debtor can keep them without turning them over to the court to be used to pay creditors. Here are some of those items:

  • Motor vehicles (but only up to a certain value: the idea is to not encumber the debtor’s ability to earn a living without transportation, but by reasonable mean, a Ferrari might not qualify)
  • Clothing (but again, reasonably necessary: if your closet contents are all designer outfits worth tens of thousands of dollars, those could be sold for value, along with a suggestion that you head to the local department store)
  • Household goods, furnishings and appliances
  • Jewelry (same as clothing…if you have heirloom jewelry that would pay off your creditors, chances are it will not be exempt)
  • Tools of the trade (those needed to earn a living such as a carpenter’s tools)
  • Some financial assets such as pensions, portions of unpaid but earned income, and public benefits such as welfare, social security, etc.
  • If you have been awarded money in a lawsuit for injuries, that money may be exempt.
  • Some amount of equity in your home.

These are just some of the items listed as exemptions in a Chapter 7 bankruptcy. But even these, or some portion of their value, could be used to satisfy creditors.  If there are certain assets that you want or need to keep, the assistance of an Ohio bankruptcy attorney can be crucial to your case.

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