Will I Lose Some of My Assets if I File for Chapter 7?

Finally, as mentioned above, exempt assets are beyond the reach of unsecured creditors. Exemptions do not ordinarily affect the rights of creditors with respect to assets on which they have liens. For example, homestead exemptions generally do not affect the rights of a mortgage lender to foreclose on the debtor's home. Under some specific circumstances, the Bankruptcy Code may permit the debtor to undo a lien and then assert exemption rights. This is a matter about which it is probably best to consult an attorney.

Nonexempt unencumbered assets. The Bankruptcy Code requires that you give all these nonexempt assets to the bankruptcy trustee. The trustee will then liquidate (sell off) these nonexempt assets for the benefit of your creditors. However, in actual practice, over 85 percent of Chapter 7 filings are "no-asset filings"-that is, there are no assets left for unsecured creditors after the exempt assets have been claimed.

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