In a "straight bankruptcy" or Chapter 7, any "nonexempt" property or assets will be sold by the Bankruptcy Trustee, with the money derived from the sale of property to be used to pay the creditors' claims.  However, most property owned by individuals is "exempt" property. This means that the property is exempt from attachment by the creditors, and cannot be sold or utilized to pay creditor debts.  In California, a person's household goods and furnishings, wages, and personal effects are generally all exempt and cannot be taken by the creditors or by the Bankruptcy Trustee.  For a complete list of California Exemptions click here.

In a Chapter 7 bankruptcy, most debts are discharged within approximately 4-6 months after the filing.  However, this type of bankruptcy may not be appropriate in certain situations. For example, some debts are not dischargeable, which means these debts continue to exist and are collectable after the bankruptcy is over.  Child support obligations, student loans, and certain tax obligations are ordinarily not dischargeable in bankruptcy. Additionally, if a creditor has a security interest -- a lien, mortgage, or deed of trust on property -- this security interest survives the bankruptcy.  The underlying debt is discharged, but if the property is not paid for, the creditor gets the property back.  As a result, many people still end up owing money after the filing of a straight bankruptcy, in the form of tax obligations, student loans and payments on secured property.

Click here for additional questions and answers on Chapter 7 Bankruptcy.