Chapter 7 bankruptcy liquidates your assets. They’re sold off, the money is paid to your creditors, and the debt is erased. The money paid is typically far less than is owed, but it still gives the creditors something as you get a clean slate.
Naturally, people are often rather concerned about doing this because they have assets they don’t want to lose — or can’t afford to lose. This usually starts with the home; people want to erase their debt and start over, but not at the cost of putting their family out on the street. Are you really going to lose everything you have?
You’re not. This is a common misconception about bankruptcy, and some people don’t file when they should because they are afraid of losing their major assets, not knowing that they’ll get to keep them. Exemptions are in place to make bankruptcy a realistic option that isn’t just going to put you in a worse position overall.
The main exemption for most people is the homestead exemption. There is also an exemption for your car, a exemption for personal property, and a wildcard exemption that you can use to keep other items that you don’t want to lose. These could be items with sentimental value or things that don’t fit perfectly in the other categories.
There are caps on the exemptions, and you certainly shouldn’t expect to keep all of your assets, but you also don’t need to fear losing everything you have. As you work through this process in Wisconsin, be very sure you understand all of the true financial implications.
Source: FindLaw, “Bankruptcy Exemptions: Chapter 7,” accessed Nov. 10, 2016