Bankruptcy is often considered an option of last resort for individuals with insurmountable debts. However, Kentucky residents should be aware that bankruptcy is a legal process that allows people to pay off their creditors, eliminate their debts, and wipe their financial slates clean once the process is over. When this happens, they can begin to rebuild their credit and start their economic lives over on stronger financial footing.
One of the most common forms of bankruptcy that individual debtors pursue is Chapter 7 bankruptcy. Often called liquidation bankruptcy, some individuals may not know exactly how this process unfolds to the benefit of debtors who secure its protections. This post does not provide any legal or financial advice, but readers are invited to review its informational contents to learn a little more about liquidation during Chapter 7 bankruptcy proceedings.
Liquidation vs. repayment of debts
Chapter 7 bankruptcy is primarily for people who do not have sufficient incomes to begin paying off their debtors. Chapter 13 bankruptcy, on the other hand, is well-suited for those who can restructure their incomes to create repayment plans for the benefit of their creditors. Income limits and other filing requirements may prevent a person with a sizable income from using Chapter 7 to get ahead of their debts.
Because individuals in Chapter 7 bankruptcy do not have money to pay their creditors, they generally must liquidate or sell off their property in order to generate funds for debt repayment. A person may have to sell vehicles, real property, and personal property in order to have money to give their creditors under Chapter 7 bankruptcy.
Protections and exemptions under Chapter 7 bankruptcy
The idea of selling one’s property and assets may be overwhelming for a person who does not have the money they need to pay their bills. They should know, though, that state and federal exemptions can allow them to keep certain items of property so that they may continue to live and work as their bankruptcy proceedings move forward. Liquidation is not intended to leave a person destitute, but rather to help them sell what they do not need to live so that they can be unburdened from their debts.
Chapter 7 bankruptcy is just one form of bankruptcy that may serve the interests of debtors. To learn more about bankruptcy, interested readers can contact their trusted Kentucky-based bankruptcy lawyers.