Some people call a Chapter 7 bankruptcy a liquidation bankruptcy. The implication is that the courts could force someone to sell off or liquidate their most valuable property to repay their creditors before they receive a discharge of their unsecured debts.
Most people feel a strong aversion to potentially losing their most valuable personal resources during a bankruptcy case. The idea of a forced sale of one’s assets is a powerful deterrent to many people who would benefit from bankruptcy but worry about the financial implications of filing. Needing to create an inventory of assets and worrying about the loss of one’s property can be stressful. People may also worry about whether they can properly manage the process of selling their assets.
It’s important to understand that very, very few filers are ever compelled to liquidate non-exempt assets. And even when this does happen – which, it cannot be emphasized enough, is rare – a trustee assigned to one’s case handles these details.
The trustee reviews assets and manages them
A bankruptcy filer doesn’t need to manage every aspect of the process on their own. The trustee appointed by the courts to oversee the bankruptcy manages the creditor meeting and could be responsible for the process of selling a filer’s non-exempt assets if liquidation is necessary.
Although the vast majority of Chapter 7 bankruptcies proceed to discharge without any liquidation or sale of personal property, some bankruptcies do lead to the sale of personal property. The process of establishing a fair market value for certain property and liquidating assets will be managed by the trustee, which helps to ensure competent and timely management of these crucial steps.
Those filing for bankruptcy need to ensure that they provide accurate information regarding their personal financial responsibilities and assets so that their trustee can apply the right rules to the process. Most people who file for Chapter 7 bankruptcy are able to use exemptions to protect their personal assets and will not need to sell any property or refinance their homes to obtain a discharge.
Learning more about the rules that apply during a Chapter 7 bankruptcy filing can help people derive as much benefit as possible from this often stressful process.
