The fact that Chapter 7 bankruptcy involves liquidating assets might make you wary about filing for it. However, if you face crushing debt, you should seek out relief. In fact, Chapter 7 bankruptcy might not take away anything that you own.
It is true that Chapter 7 can result in a bankruptcy trustee selling off some of your property to satisfy some of your debt, but only if the assets you own are non-exempt.
Chapter 7 and asset exemptions
In Chapter 7, you have the opportunity to exempt certain assets from liquidation. Oregon offers a set of exemptions that protect various types of property, such as your primary residence, vehicles up to a certain value, household goods, and retirement accounts. If your assets fall within these limits, the trustee cannot sell them off.
For example, Oregon allows you to exempt up to $40,000 in equity for your home if you are single or $50,000 if you are married. You can also protect up to $3,000 in one vehicle. These qualifications provide a safety net, ensuring you do not lose your home or means of transportation to compensate creditors.
No asset cases and non-exempt property
The vast majority of Chapter 7 cases are classified as “no asset” cases because exemptions fully cover the filer’s assets. In these situations, the trustee does not liquidate any property because everything qualifies for exemption.
However, if you have non-exempt assets exceeding the exemption limits, the trustee may sell those assets to repay creditors. This scenario is less common, but it highlights the importance of understanding exemption laws and properly valuing your assets.
No bankruptcy should leave you destitute. The process aims to give you a fresh start by discharging eligible debts while allowing you to keep essential property protected by exemptions. With careful planning and adherence to bankruptcy laws, you can emerge from Chapter 7 with a clean slate and the ability to rebuild your finances.
