What if Your Debtor Does Not Have Anything to Liquidate?

With growing debt the words ‘Chapter 7 Bankruptcy’ are beginning to be heard more often.  As you know, Chapter 7 bankruptcy involves liquidating the non-exempt assets and paying off your debt.  All of your debts are separated into secured and unsecured.  The secured debts will have to be lawfully paid off or the collateral will be taken.  The unsecured debts will be put into two categories, and from there the assets will be liquidated.  However, the question must be asked, what does one do in the case of no assets? 

What is a no-asset case?

As has been previously stated, when Chapter 7 is filed the assets for unsecured debts are separated into two categories.  These categories are exempt and non-exempt properties. 

It’s the non-exempt properties that are eligible for liquidation to pay off creditors.  A trustee is assigned to the properties, and they are in charge of liquidating them and gaining the cash to pay off the creditors.   However, more often than not there aren’t any assets that would fall under this category.   This would be considered a no-asset case.

What happens when there is a no-asset case?

When a no-asset case is presented, the creditors do not get paid from the unsecured debt. There isn’t any property to be liquidated, so there isn’t any cash to be handed off.  This results in the debtor’s debt being discharged, and the credit card company not receiving a payday.  Most lawyers will do their best attempt in making sure their client (the debtor) doesn’t have any non-exempt assets throughout the liquidation process. 

 

Debt collection attorneys specialize in realizing when a property should be considered non-exempt.  Despite the relentlessness of the other side, collection attorneys are able to aid the debtee in collecting the debt that is entitled to them.