If you have significant personal property, you may still be able to qualify for Chapter 7 bankruptcy. Still, there are strict limitations on Chapter 7 to protect lenders and creditors from abuses by those with significant assets.
To receive a discharge of your unsecured debt, you will first have to sell off or liquidate some of your property. You can exempt some property, including equity in your home and some personal items, from the liquidation requirement, but you may have to sell or refinance other assets.
Much of the bankruptcy process is automatic or occurs in court. However, the liquidation of your personal property won’t occur during a court hearing. It will occur between the creditor meetings and when you eventually receive your discharge. Who is responsible for selling your property as part of a Chapter 7 bankruptcy filing?
Liquidating assets and distributing income is the trustee’s responsibility
The courts often appoint a trustee to oversee the details of different kinds of bankruptcy filings. In a Chapter 7 bankruptcy, the main role of the trustee is to identify valuable personal property not exempt during the filing and to appropriately liquidate those assets by obtaining a fair market value for them.
They then have to determine the priority of different debts and pay off your creditors in order of priority with the proceeds from the sale. Although you won’t have direct control over this process, that fact actually protects you. You won’t be able to make mistakes or oversights by repaying the wrong creditor or selling an asset for too little.
Understanding the different steps involved in a Chapter 7 bankruptcy filing can make it easier for you to navigate the process.