What Is a Chapter 7 No-Asset Bankruptcy Case?

The majority of Chapter 7 bankruptcies are no-asset cases. Find out what that means.

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The majority of Chapter 7 bankruptcies filed in the United States are no-asset cases. When a Chapter 7 bankruptcy is considered a no-asset case, it simply means that the debtor does not own any nonexempt assets that can be sold to pay creditors. Read on to learn more about Chapter 7 no-asset bankruptcies.

How Does Chapter 7 Bankruptcy Work?

When you file for Chapter 7 bankruptcy, all of your assets become property of the bankruptcy estate. An impartial trustee is appointed to administer your case, sell any nonexempt assets, and distribute the proceeds to your creditors. (Learn more about how Chapter 7 bankruptcy works.)

However, just because you file for Chapter 7 bankruptcy does not mean that the trustee is going to sell all of your property. Each state (and the federal system) has a set of exemptions that allows you to protect a certain amount of property in Chapter 7 bankruptcy. If you can exempt an asset, you can keep it.

What Is a Chapter 7 No-Asset Bankruptcy Case?

If you can exempt all of your property, the Chapter 7 trustee cannot sell any of your assets to pay your creditors. This is referred to as a Chapter 7 no-asset bankruptcy. Most Chapter 7 bankruptcies are no-asset cases. If all of your assets are exempt, the trustee will typically file a no-asset report in your case and your creditors will not receive anything through the bankruptcy.

The idea behind exemptions is that you need a certain amount of property to sustain yourself and make a fresh start after bankruptcy. How much property you can protect in Chapter 7 bankruptcy depends on your state’s exemption laws and the value of your assets. Exemption amounts vary significantly from state to state. As a result, review your state’s exemptions or consult a knowledgeable bankruptcy attorney in your area prior to filing your case. (Learn more about bankruptcy exemptions in Chapter 7, including the exemptions available in your state.)

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