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California Bankruptcy Help
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Chapter 7 Overview In a Chapter 7 bankruptcy proceeding, a court-appointed trustee will divide the debtors property into exempt property and non-exempt property. Types of property that may be exempt are the debtors home, auto, and household goods. There are dollar limits on each type of exempt property. The trustee will sell all of the debtors non-exempt property and use the proceeds to pay off the debtors unsecured creditors. An unsecured creditor is one who does not have a security interest in any of the debtors property as an assurance that the loan will be repaid. Examples of this would be credit card debt or a signature loan. Secured creditors are protected by their security interest in the debtors property (called collateral). If a debtor stops making payments, the secured creditor can take possession of the debtors collateral. Once the exempt property is liquidated and distributed among the unsecured creditors, the remaining unsecured debt is discharged. However, some types of unsecured debt, including student loans, child support, and taxes, cannot be discharged, even in a bankruptcy proceeding.
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