Millions of Americans suffer from insurmountable debt. Many of these people have no idea what they can do to get out of this financial bind. When asking for help, the terms bankruptcy and debt consolidation often come up. Depending on the amount of debt the individual has, many times debt consolidation is not even an option. The only way to get out of large amounts of unsecured debt is to file for Chapter 7 bankruptcy. Chapter 7 bankruptcy will eliminate all unsecured debt, such as credit cards, medical bills, and personal loans. The first thing people think of when they hear the word Chapter 7 bankruptcy is that they are going to lose all their property. People fear that the bankruptcy trustee will take all their collectibles and family heirlooms to sell at auction and pay off their debts. When in reality, this is more myth than reality.

Most people’s valuables or what they consider valuable are only worth something to themselves. Debtors who file bankruptcy think that if they list their collectibles, the trustee will immediately repossess them for sale. Many people who file for bankruptcy are surprised when they discover that their prized collectibles aren’t really worth as much as they thought. Many collections are very difficult to sell and are not worth the bankruptcy trustee’s time to attempt the process. One thing we haven’t even covered is that debtors who file for bankruptcy are also protected by a host of exemption laws. Bankruptcy exemptions vary from state to state, but in most areas they offer generous amounts for personal property. If you can’t exempt it under one of the different categories, each debtor has an ace up their sleeve with the wild card exemption. The bottom line is that Chapter 7 bankruptcy trustees are not interested in selling these types of items.

When filing bankruptcy, the trustee is responsible for verifying the debtor’s assets and collecting any property that is not exempt. The idea is that the bankruptcy trustee is supposed to sell the non-exempt property and apply the proceeds to the debts. The bankruptcy trustee must also consider the costs of administering the case. In many cases, it costs more to collect and sell the property than the proceeds value. Most bankruptcy trustees will not even try to sell the property and distribute the proceeds to creditors unless they can make a substantial amount to cover their costs.

If a person has a valuable item like a gold watch or some expensive antiques and they do not fall within the state exemptions, it could justify the sale of the property by the bankruptcy trustee. This doesn’t happen very often. In general, the bankruptcy trustee does not want to collect and take the property from the person who files bankruptcy. As long as the property is protected by the exemption laws, they don’t want it. Sometimes the debtor will be able to reach an agreement with the Chapter 7 trustee to repurchase items of the bankruptcy estate, as long as the debtor has the money to do so. And in a Chapter 13 bankruptcy, debtors can keep all of their property if they get something done with creditors and complete the 3-5 year repayment plan. Depending on the amount of property you own and are considering bankruptcy, you may want to consult a bankruptcy attorney to ensure that their property is protected to the extent of the exemption laws in your area.