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Don’t let liquidation scare you away from bankruptcy

On Behalf of | Dec 6, 2021 | Bankruptcy | 0 comments

When you learned about bankruptcy in the past, it was likely with the understanding that it would lead to the liquidation of your assets. For many people, the idea of liquidating the items they own actually prevents them from filing for bankruptcy when they could really use that kind of financial help.

You should understand that Chapter 7 bankruptcy is a liquidation bankruptcy, but that doesn’t mean that all bankruptcies require you to liquidate your assets. Even with Chapter 7 bankruptcy, there are exemptions that help you avoid losing items that you need — and the vast majority of people who file Chapter 7 never liquidate anything.

Liquidation: What it really means for you during bankruptcy

When you file for bankruptcy, you’ll choose from different kinds of bankruptcy. Most consumers go with Chapter 7 or 13 bankruptcy. Chapter 7 requires you to give up excess assets and to sell them to repay debts. Chapter 13 bankruptcy often does not require any kind of liquidation.

Even with Chapter 7 bankruptcy, you will not have to liquidate everything — and you may not liquidate anything at all. This is because bankruptcy is not designed to make you start from scratch. Instead, there are exemptions that may help you keep your home, retain a vehicle of a certain value or to protect the possession you want to keep, like clothing or electronics. There is also a wildcard exemption that allows you an exemption for items up to a certain value, no matter what those items may be.

If you’re struggling with your debts, don’t let the things you’ve heard about “liquidation bankruptcy” scare you away from the help that you deserve.