When filing a chapter 7 bankruptcy, the debtor will often have no assets that need to be surrendered in bankruptcy. A no asset case is a case in which the debtor has no non-exempt assets for the trustee to distribute to the creditors. Each state has its own exemption code. Property is exempt when the property that is owned by the debtor falls within one of the statutory exemptions for the state in which the debtor is able to file the bankruptcy petition. When all the property that the debtor owns falls within the state’s exemptions, the case is a no asset case and none of the debtor’s property within the exemptions will be surrendered in bankruptcy.
Problems start to arise when the debtor has property that does not fall within her state’s exemption code. The trustee can, but does not always require the petitioner to surrender all of the non-exempt property. If the debtor has non-exempt assets or questions about whether their assets are exempt, this would be the perfect time to consult an experienced bankruptcy attorney to discuss the debtors options under the bankruptcy code.
Although, an asset may not be exempt, pre-petition planning with a bankruptcy attorney, in some instances may allow you to keep the non-exempt property out of the bankruptcy estate. Further the amount of non-exempt assets that you have may warrant changing your case from a Chapter 7 to a Chapter 13. The matter of determining which Chapter is right for a debtor’s particular situation is something that should be discussed with an attorney that is familiar with the bankruptcy code and the process of filing for bankruptcy.
Whether a debtor has solely exempt assets or a mixture of exempt and non-exempt assets, it is useful to consult with an attorney to more fully understand the options that are available to a debtor.
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