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Filing For Chapter 7 Bankruptcy? Here Are A Few Terms You'll Need To Know

Bankruptcy proceedings can be complicated, especially if you aren't familiar with the legal terminology used to refer to your debts and assets. Before you submit anything, it's important to understand how your debts will be handled and which assets you will be able to keep once the process is complete.

Types of Debt


Secured debts are tied to a piece of property like a home or a vehicle by a lien against it. This means that the property can be seized and sold if the debtor cannot pay the debt. If the amount owed exceeds the value of the item, you may be sued for the remainder. In chapter 7 bankruptcy, liens are not removed even if you are no longer liable for the debt. This means the item can still be repossessed if you choose not to pay the debt after bankruptcy.

Examples of secured debts:

  • Car loans
  • Home mortgages
  • Buying an expensive item via financing
  • Any loan for which you have put up collateral


In contrast to secured debts, unsecured debts are not connected to an item at all. Instead of being able to claim one of your assets, creditors will have to hire collection agencies or sue you to get the money owed. Qualifying unsecured debts are discharged fully in bankruptcy, leaving no responsibilities for the debtor.

Example of unsecured debts:

  • Credit card debt
  • Loans with no collateral
  • Medical bills
  • Utility bills
  • Personal loans
  • Bounced checks
  • Past due rent or other lease agreement debts
  • Civil court fees and judgments
  • Social security overpayments


The term "dischargeable" refers to debts will may be ameliorated through chapter 7 bankruptcy proceedings. Technically, the debt will still exist, but you will have no legal responsibility to pay them. They may be secured or unsecured, but as mentioned previously, creditors of secured debts may still repossess items with valid liens on them. Debts must be incurred prior to filing for bankruptcy in order to be dischargeable. Debts are typically discharged 4 months after bankruptcy proceedings conclude, if everything goes smoothly

Dischargeable debts come in a variety of types. Unless explicitly nondischargeable, any debt may be lifted through chapter 7 bankruptcy.


These debts persist after bankruptcy proceedings conclude. You will need to make payments on these debts during bankruptcy as well as after. 

Fortunately, there are only a few specific types of nondischargeable debt:

  • Back taxes and IRS fees you have recently incurred
  • Student loans when repaying the loans would not cause you undue hardship
  • Debts you do not list on your bankruptcy filing papers
  • Judgments against you for hurting or killing someone while drunk driving
  • Alimony or child support payments, as well as back payments
  • Criminal fines or penalties

Terms For Your Assets


Exempt assets cannot be seized and sold to repay your creditors during bankruptcy proceedings because they are deemed necessary under the law. You will retain these assets after bankruptcy.

Qualifying assets may vary slightly by state laws, but typically the following items are exempt:

  • Motor vehicles below a threshold value
  • Appliances
  • Reasonably required clothing
  • Household good and furnishings you require
  • Public benefits from social security payments, unemployment, or welfare
  • Pensions
  • A portion of home equity
  • Jewelry
  • Work tools up to a certain value


Nonexempt assets will be seized and sold by your bankruptcy trustee in order to pay your creditors. A certain amount of your nonexempt assets may be protected with a wildcard exemption in some states, which allows you to keep a set value in property. Other nonexempt assets may be left alone if their value is not sufficient to be worth sale. All assets not listed as exempt are nonexempt, including cash and investments.

Hopefully, knowing these terms will make your bankruptcy proceedings less stressful and enable you to plan for your life after bankruptcy. If you're worried about losing certain assets during the process, you should talk to a lawyer about how to protect your property and whether filing for chapter 7 bankruptcy is the right solution for your circumstances.

Contact a personal bankruptcy attorney for more information