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What is a No-Asset Bankruptcy?

By Derek Prosser

When we think of filing for bankruptcy, it is easy to assume that all of your assets will be sold. However, most bankruptcy cases are no-asset bankruptcy. So, what exactly is a no-asset bankruptcy, and who qualifies for one? Here is what to know about a no-asset bankruptcy and what you can do if you are financially struggling. 

Exempt vs. Non-Exempt Assets 

When you file for bankruptcy, you must list all the different types of your asset you own.  Those assets will be either exempt or non-exempt. Exempt assets cannot be liquidated in order to pay off debts. Non-exempt debts, on the other hand, maybe liquidated by the court in order to pay off your debts. So, what happens if you don’t have any non-exempt assets? How do you pay off your debt? This is considered a no-asset bankruptcy. In other words, a no-asset bankruptcy is one in which you don’t have the assets that your bankruptcy trustee can sell to pay off your debts. If you don’t have non-exempt assets the court will look at your debts and evaluate which ones can be discharged. 

Chapter 7 No-Asset Bankruptcies

Most Chapter 7 bankruptcies are no-asset bankruptcies. In order to file for Chapter 7 bankruptcy, it requires you to pass a means test in order to see if your disposable income qualifies you. Once you pass the Means Test, the Trustee will examine if your assets are exempt.  If your assets are exempt, they will issue a no distribution report, which will allow your case to be closed and discharged. 

Unsecured vs. Secured Debts

However, it’s important to understand the difference between secured and unsecured debts. The most common secured debts are house and vehicle loans. Even though secured debts are included in your bankruptcy, you will still be obligated to make payments on those loans if you want to keep the assets. Alternately, most unsecured debt is discharged.  Common examples of unsecured debts that aren’t covered by the discharge include most taxes, student loans, support obligations, and debts incurred through fraud. 

What Happens if You Hide Assets?

You should never intentionally hide assets, but if the bankruptcy trustee finds that there is an asset that you did not include, they will let the court and your creditors know. Your creditors can then put a claim against the asset. It’s important to note that sometimes people forget and unintentionally leave off an asset. However, if you are found to have intentionally left an asset off when you filed, your case could potentially be dismissed.

Toronjo & Prosser Law Helps Those Who Are Dealing with Bankruptcy 

Filing for bankruptcy is a big decision that can have a long-lasting impact on many different aspects of your life. It is a decision that should never be taken lightly, and one that should be your choice – not someone else’s – whenever possible. That’s why it’s so important to consult with a knowledgeable and experienced Dallas bankruptcy attorney who can help you to defend against your creditors’ petition. Additionally, if any creditors are currently harassing you, an attorney can also help. At Toronjo & Prosser, our qualified Texas Bankruptcy Attorneys can help you to navigate the process. To learn more or to schedule a free consultation contact us online or call us today!

About the Author
Derek Prosser understands that clients need help and need answers and that in order to properly address those concerns, clients need to deal with an attorney first and always, not just an assistant or paralegal.  By effectively counseling from the outset of a case, Toronjo & Prosser Law can anticipate and address potential problems before they arise, as opposed to when they’ve already surfaced (the “Counsel Later” approach), and, in the end, strive for a seamless representation.