The majority of Chapter 7 bankruptcy filers do not lose any assets through the bankruptcy process. These cases are often referred to as no-asset bankruptcy cases. In such a case, the Trustee informs creditors not to expect payment out of the bankruptcy proceeds.
In a no-asset Chapter 7 scenario, you do not have any assets that the bankruptcy trustee is allowed to take and sell for the benefit of creditors. Of course, most debtors have personal property and a home, but the debtor still normally retains all of their property because it is protected under federal or state law exemptions.
Understanding What No Asset Means
“No Asset” is a term used to describe debtors who declare bankruptcy without owning property that the Trustee or Creditors can take. It’s worth noting that this doesn’t mean the debtor is homeless or living in poverty. It implies that the debtor’s assets are all secured or shielded by exemptions or that the debtor’s assets that are not exempt are not valuable enough to warrant being sold.
To decide whether the bankruptcy will be a no-asset case, knowing how much your property is worth and what exemptions are available is vital. ⠀
Exempt vs. Nonexempt Property
- Exempt property. The state of Texas has several bankruptcy exemptions you can use to protect certain assets in Chapter 7 bankruptcy. Exemptions exist because everyone needs some property to sustain themselves and to start anew. If you can exempt an asset, you get to keep it.
- Nonexempt property. The Chapter 7 bankruptcy trustee sells any nonexempt asset to repay the creditors, with the exception of property that is not valuable enough to warrant selling it
Bankruptcy exemption amounts will vary depending on the case. For this reason, you will want to consult a knowledgeable bankruptcy attorney like Acker Warren P.C.