People who don't lose property in Chapter 7 have a "no-asset" Chapter 7 bankruptcy case. Having a no-asset bankruptcy matter doesn't mean you don't own anything—it means bankruptcy exemption laws protect all of your assets, leaving nothing for the Chapter 7 bankruptcy trustee to sell to repay your creditors.
In this article, you'll learn more about Chapter 7 no-asset cases, including:
If you have any concerns about property in a Chapter 7 case, a bankruptcy lawyer is best positioned to review your case and explain your options. And after you've learned whether you can keep all your property by filing a Chapter 7 no-asset bankruptcy, check out the resources provided at the end of the article. You'll find links to applicable bankruptcy forms and additional articles we think you'll enjoy.
Yes. Although owning property is common, having assets isn't a requirement for filing for Chapter 7 bankruptcy. You likely have personal items you can protect with a bankruptcy exemption, and you'll list those items in a no-asset Chapter 7 bankruptcy case.
Example. Alexa incurred $35,000 in credit card debt during college, but when she didn't land the high-paying job she expected after graduation, she moved back in with her parents, bringing nothing more than her clothes, phone, and computer. If she files for Chapter 7 bankruptcy, she'll list the minimal property she owns in the bankruptcy case.
At the 341 meeting of creditors—the one meeting all filers attend—the Chapter 7 trustee appointed to her matter will likely ask why she didn't list more property and accept her answer without an issue. Learn about questions to expect at the 341 meeting of creditors.
A no-asset bankruptcy means the filer doesn't lose any property in Chapter 7 bankruptcy because the filer can protect all of their property in Chapter 7 bankruptcy using bankruptcy exemptions. When the trustee can't sell any property, creditors don't receive any money, making it a no-asset Chapter 7 case.
Having a no-asset case doesn't mean that a debtor owns nothing, is homeless, or lives in poverty. It simply means the debtor's assets are protected or covered under exemptions.
You'll need to know your property's value and the available exemptions to determine if your bankruptcy will be a no-asset case. It will be a no-asset Chapter 7 bankruptcy if all your assets are "exempt" or protected under bankruptcy law.
For instance, it's possible to own a car, house, and more, and still have a no-asset case if all of the property equity is covered with bankruptcy exemptions. Find out about keeping a home in Chapter 7 bankruptcy.
You get to keep "exempt assets" or property protected by a bankruptcy exemption in Chapter 7. The trustee can only take and sell property that is not exempt for the benefit of your creditors.
Because bankruptcy is supposed to give you a fresh start and not leave you entirely destitute, federal and state laws allow you to keep specific property. For example, personal goods, homesteads, and motor vehicles are usually exempt up to a certain amount, and qualified retirement accounts are exempt property.
Your state decides whether you must use the state bankruptcy exemptions or if you can use the federal bankruptcy exemptions instead. If you aren't sure what you can keep, a bankruptcy attorney can help.
If you stand to lose property in Chapter 7 that you'd like to keep, you might be able to buy the property from the trustee at a discount, and many will deduct sales costs.
Otherwise, consider filing for Chapter 13 bankruptcy. In Chapter 13, you keep all of your property because the Chapter 13 bankruptcy trustee doesn't get paid to sell assets for the benefit of creditors. Instead, you'll pay creditors the value of nonexempt property through your Chapter 13 repayment plan.
Learn about calculating a Chapter 13 plan payment.
Your bankruptcy case will move more quickly and close sooner because the trustee won't need to keep it open to sell property. However, it won't hasten the debt discharge because it isn't dependent on property sales, and you receive it before the case closes.
Also, even if you forget to list a qualifying debt, your bankruptcy court will likely still dismiss it because, in no-asset cases, none of the creditors receive anything. While most bankruptcy courts follow this approach, all bankruptcy courts will reverse the discharge if the unlisted creditor can prove fraud.
To learn more, see What happens if I forget to list a debt in my Chapter 7 bankruptcy?
Bankruptcy is essentially a qualification process. The laws provide instructions for completing a 50- to 60-page bankruptcy petition, and because the rules apply to every case, you can't skip a step. We want to help.
Below is the bankruptcy form for this topic and other resources we think you'll enjoy. For more easy-to-understand articles, go to TheBankruptcySite.
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We wholeheartedly encourage research and learning, but online articles can't address all bankruptcy issues or the facts of your case. The best way to protect your assets in bankruptcy is by hiring a local bankruptcy lawyer.