There are many myths associated with declaring bankruptcy, and the myth of losing literally everything is one of the most pervasive associated with filing Chapter 7. It is important to realize that, no, you will not lose everything you own if you choose this bankruptcy route.

Chapter 7 is a “liquidation” bankruptcy, where the law will liquidate your personal assets to remove your debt. However, according to debt.org, the vast majority of Chapter 7 cases are no-asset cases.

What is a no-asset case?

In this particular variety of Chapter 7 bankruptcy, this means that the person in debt will not give up any of their possessions. Actually, under the law, it is necessary for the debtor to hold on to possessions required for everyday life. This means that you will be able to keep your primary residence, car, and anything else required for you to work.

These items are “exemptions.” Essentially, filing Chapter 7 bankruptcy will not make you actually homeless and it will not interfere with your ability to gainfully employed.

What will be “liquidated?”

The law will liquidate non-exempt property. This means that if you happen to own luxury items such as multiple cars, boats, or additional properties other than your primary residence, creditors will liquidate these to pay off your debts. You will also lose all of your credit cards.

It is important to understand what is fact and what is myth. If you are eligible for a Chapter 7 bankruptcy, you need not worry that you will end up homeless as a result of filing. Chapter 7 bankruptcy can be difficult on your credit score, but you will not be on the street because of it.