You might suddenly find yourself in a position where you are unable to pay your monthly bills because of divorce or loss of job. Chapter 7 filing comes to the aid of those who want to quickly get rid of some unsecured dues like utility bills, credit card payment, department store bills, medical bills, etc. The benefits of filing a chapter 7 bankruptcy petition are:
1. The process is completed within a few months
2. You get the protection of automatic stay as in a chapter 13 petition
3. In addition, you get to retain some of your possessions because chapter 7 exempts some kind of property from bankruptcy proceedings.
Let us try and understand the exemptions under chapter 7. There are federal and state exemptions. While some states insist that you choose state permitted exemptions, some states let you choose between federal and state exemptions. Depending on the state you are in and the kind of property you would like to exempt, you can make the choice.
• Homestead exemption: You may be allowed to exempt the entire value of your residence or up to a certain limit of its value. The limitation depends on the state you are in. The rule will vary if the residence is joint property.
• Vehicle exemption: You will be able to retain your vehicle if its equity value comes within your state’s exemption requirement. Generally, the limitation is $3000.
• Others: Property like household items, jewelry, alimony, child support, insurance plans, retirement plans etc. can be retained. If there is some equipment necessary for your trade (like a musician’s guitar), that will also be exempt from bankruptcy proceedings.