There is a litany of misinformation surrounding the concept of filing for bankruptcy protection. Many people believe that bankruptcy is always the result of financial mismanagement, which is simply untrue. Citizens of Kentucky filing for bankruptcy protection need to be informed about the different types of bankruptcy, what assets are protected within those types and more.
What is Chapter 7 bankruptcy?
Chapter 7 bankruptcy protection is one of the many types of bankruptcy that an individual can file for in the event of financial hardship. Under Chapter 7 bankruptcy, the court will appoint a trustee to lead the process of liquidating the petitioner’s assets in order to pay off outstanding debt to their creditors. At the end of the liquidation process, creditors typically receive a discharge, or an elimination, of debts that they will not be entitled to.
Does Chapter 7 bankruptcy result in losing a home?
During a Chapter 7 proceeding, non-exempt assets are liquidated in order to pay outstanding debts. Every state, including Kentucky, offers at least one exemption known as a “homestead exemption,” which typically applies to the primary residence of the person filing for bankruptcy.
However, the application of this exemption does not come without some sort of obligation. The person filing for bankruptcy is required to maintain their mortgage and homeowner’s insurance as well as pay their property taxes to avoid having their home seized after their Chapter 7 bankruptcy case is closed.
Anyone who finds themselves in the unfortunate position of needing to pursue Chapter 7 bankruptcy protection is encouraged to contact an attorney. A bankruptcy law attorney may review their clients’ financial assets and guide them through the process of selecting and filing for the type of bankruptcy protection that they need.