The stigma associated with bankruptcy is a strong deterrent for the average person. They believe that bankruptcy is only for irresponsible people or unethical businesses trying to avoid personal responsibility for prior bad decisions. In reality, bankruptcies are often the result of unfortunate personal circumstances, like a recent battle against cancer.
When unsecured debt starts piling up, people may not be able to pay all of their bills in full and on time each month. They fall farther and farther behind with each late or missed payment. By the time someone starts thinking about filing for bankruptcy, their financial circumstances are probably overwhelming.
Chapter 7 does require the sale of property
Chapter 7 bankruptcies can protect individuals from creditor lawsuits and constant collection efforts, but at a cost. People also refer to Chapter 7 proceedings as liquidation bankruptcies because this kind of bankruptcy requires that someone sell off some of their personal property before they receive a discharge.
The idea that the court could force you to give up your personal property is a major deterrent for some people considering Chapter 7 bankruptcy. Homeowners, in particular, may worry about losing what they have invested in their residence. Is your home at risk in a Nevada Chapter 7 bankruptcy filing?
You have the right to protect home equity
Nevada state law and federal rules create options for Chapter 7 bankruptcy. There are certain assets that you can protect from liquidation while still qualifying for the discharge of your unsecured debt. Nevada has a generous homestead exemption. You can protect up to $605,000 in home equity as of 2022, double that amount if you file jointly for bankruptcy with your spouse.
If you have more equity in your home than this, the trustee overseeing your bankruptcy may require that you refinance and use the excess equity to repay some of your creditors. If you have any more equity than the current exemption limit or if you have other property that you cannot risk losing to liquidation, then a Chapter 13 bankruptcy may be a good option for you.