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Chapter 7 and the “necessities of modern life”

Perhaps you face a mountain of debt and are considering filing Chapter 7. You know you will have to give up some of your property, but what will that include?

Do not worry about losing items that are essential for living and working. With regard to your bankruptcy procedure, these are known as the “necessities of modern life.”

How Chapter 7 helps

As soon as you file your Chapter 7 bankruptcy petition, your creditors must stop their harassment. They must desist making calls to you or sending collection letters. Chapter 7 will also stop a foreclosure as well as any repossession or wage garnishment activities. This type of bankruptcy requires that the bankruptcy trustee assigned to your case sell your nonexempt assets, using the proceeds to repay creditors. However, the law allows you to keep exempt property.

Understanding the difference

When you file for Chapter 7, you must turn over property to the bankruptcy estate that the law categorizes as nonexempt. For example, you might have to relinquish your vacation home, a second vehicle, a valuable coin collection or your baby grand piano, unless you are a professional piano player. However, you do not have to turn over assets that the law considers “necessities of modern life.” This is the meaning behind exempt property, and there are many examples:

  • Vehicles up to a certain value
  • Necessary clothing, furnishings and household goods
  • Household appliances
  • A portion of equity in your home
  • Tools of your profession or trade
  • Welfare assistance, Social Security payments or unemployment compensation proceeds in a bank account
  • Compensation awarded for a personal injury
  • Jewelry up to a certain value

A new start

The objective of bankruptcy law is to help you get a new financial start in life. The government recognizes that asking you to give up everything you own would defeat the purpose. Filing Chapter 7 is the fastest way to help you achieve your goal of becoming debt-free.

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