Definition

During Chapter 7 bankruptcy, a court appointed trustee--who is trained by the U.S. government for this purpose--takes non-essential, or "non-exempt," property from the debtor and sells it, distributing the money to the debtors creditors. The debt owed by the debtor is then discharged or removed, even if the creditors don't receive all the money owed. See the Non-Exempt Property Section in this article for more information.

Non-Exempt Property

Non-exempt property is property that is considered excessive and non-essential to basic living. This includes expensive musical instruments--professional musicians are exempt--stamp collections, jewelry, heirlooms, cash, stocks, bonds, investments, extra vehicles and vacation homes. Your home, clothes, one vehicle, pensions, trade tools and household appliances are exempt.

Dischargeable Debt

Taxes, spouse and child support, debts earned through illegal actions, student loans and criminal fines are considered non-dischargeable debt. Most other debts will be discharged, including bank loans or credit card debt.

Qualifying

In order to qualify for Chapter 7 bankruptcy you must own a home, place of business or property in the United States, have not filed for Chapter 7 in the last six years, have not had bankruptcy dismissed in the last 180 days, pass the means test and have debt that you could not pay off in your lifetime with your income.

Credit

It will be extremely difficult to obtain any credit cards or loans after you file for Chapter 7 bankruptcy. Credit Info Center reports that it can take three to four years to begin rebuilding your credit score and that your bankruptcy will stay on your report for up to 10 years.

Source:

Consumer Debt Statistics: Money Zine

Find Law: Exempt Vs. Non-Exempt Property

Credit Info Center: Chapter 7

More Information:

Bankruptcy Home: Chapter 7

U.S. Courts: Chapter 7