by Mark E. Godbey, Lawyer Referral Service Panelist
In a bankruptcy case under Chapter 7 (straight bankruptcy), you file a petition asking the court to discharge your debts. The basic idea in a Chapter 7 bankruptcy is to wipe out (discharge) your debts in exchange for your giving up property, except for “exempt” property which the law allows you to keep. In most cases, all of your property will be exempt. Property exemptions are state specific and may be complicated depending on types of personal property you have; only a skilled bankruptcy attorney will be able to assist you with determining what property is or is not exempt. If your property is not exempt or has value in excess of the applicable exemption, your property will likely be sold and the funds distributed to your creditors.
If you want to keep property like a home or a car and are behind on the payments on a mortgage or car loan, a Chapter 7 case will not be the right choice for you. That is because Chapter 7 bankruptcy does not eliminate the right of mortgage holders or car loan creditors to take your property to cover your debt.