A Chapter 7 bankruptcy is known as a liquidation proceeding, because a debtor filing under this chapter subjects his or her non-exempt assets to the control of a bankruptcy trustee whose job it is to sell those assets to pay creditors. If there are no non-exempt assets, unsecured debts are typically "discharged," meaning that they are legally non-existent. In the majority of Chapter 7 cases, our clients' bankruptcy trustees do not end up selling any property because the Bankruptcy Code allows Chapter 7 debtors to "exempt" most personal property from sale. For example, your equity in a home owned by you and used as your personal residence is exempt up to $20,250, and your equity in an automobile is exempt to the extent of $3,125. If your equity in your home or car does not exceed the amount of your exemption, and if you keep your payments current, then you may be able to keep those assets without fear of losing them to the trustee or your creditors.
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