Five Things to Know About Liquidation Bankruptcy

When people think about consumer bankruptcy, they often think about liquidation bankruptcy, or a type of bankruptcy in which non-exempt assets are liquidated and remaining eligible debts are discharged. Yet there are many misconceptions about liquidation bankruptcy out there, and it is important to understand key aspects of liquidation bankruptcy if you are thinking about your options. The following are five things to know about liquidation bankruptcy. If you have follow up questions or need assistance with your case, an Oak Park bankruptcy attorney at our firm can help.

1. Consumer Liquidation Bankruptcies are Chapter 7 Bankruptcies

Anytime a consumer is talking about the possibility of filing for liquidation bankruptcy, they are likely referring to Chapter 7 bankruptcy. Chapter 7 bankruptcy is the most common type of liquidation bankruptcy for both consumers and businesses, and it is the type of bankruptcy you should anticipate if you are thinking about a liquidation bankruptcy.

2. Some Assets Will be Liquidated to Repay Creditors

You may have heard that your assets will be liquidated to repay creditors. This is partially true; all of your non-exempt assets will be liquidated in order to repay creditors, but not all of your assets will need to be liquidated.

3. Many of Your Assets May be Exempt From Liquidation

There are a wide variety of bankruptcy exemptions under Illinois law. The homestead exemption and motor vehicle exemption will allow you to exempt up to a certain amount of equity in your house and car, while other exemptions can allow you to retain personal property, work tools and books, retirement assets, public benefits, and numerous other assets.

4. You Must Prove Your Eligibility for Liquidation Bankruptcy

In order to be eligible for liquidation bankruptcy as a consumer, you must prove that you are eligible by passing the “means test.” To be clear, although both individual consumers and businesses can file for Chapter 7 bankruptcy, it is only consumers that will need to pass the means test. This test is designed to show that you have sufficiently low income and assets such that it would not constitute bankruptcy abuse to allow you to discharge your eligible debts.

5. Not All Debts are Dischargeable in a Liquidation Bankruptcy

Even if you are eligible for a liquidation bankruptcy as a consumer, it is critical to work with a bankruptcy attorney on your case to ensure that your debts are eligible to be discharged. While many types of consumer debt are dischargeable, there are some types of consumer debts that are non-dischargeable under the U.S. Bankruptcy Code. Examples of debts that usually are dischargeable include credit card debt and medical debt. Types of debt that are not dischargeable are debts owed from family support payments and certain types of tax debt.

Contact Our Oak Park Bankruptcy Attorneys

For any questions concerning consumer bankruptcy or to speak with an advocate about your options for consumer bankruptcy, you should get in touch with one of the experienced Oak Park bankruptcy lawyers at our firm. Contact the Emerson Law Firm today for more information about the services we provide to consumers who are struggling with debt.



See Related Blog Posts:

Common Kinds of Debt That are Dischargeable in Consumer Bankruptcy Cases

Actions to Avoid Before You File for Bankruptcy

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