For anyone filing a Chapter 7 bankruptcy case, the words “asset case” can be terrifying. If you tell people you are filing a Chapter 7 case, at least one person will know “someone” who lost everything when they filed bankruptcy. It is almost like being pregnant or having heart surgery – – as soon as people find out, they want to tell you horror stories about their sister’s, husband’s, mother’s, nephew’s friend and how awful it was for that person.
The truth is that almost all Chapter 7 cases filed in New Jersey are “no asset” cases. In a no asset case, the debtor retains all of his or her property while discharging most, if not all, of his or her unsecured debts. This is exactly what the debtor needs in order to recover from a financial crisis and begin to rebuild his or her financial well-being. Even though your case is likely to fall within the large percentage of no asset cases, below is a summary of an asset case.
If you have further questions about an asset case, I urge you to schedule a free consultation with my office to discuss affordable solutions, bankruptcy and non-bankruptcy options, to your debt problems. Dealing with overwhelming debt is very stressful. We want to help you find a solution to debt problems that works for you and gives you the fresh start you need to enjoy life after debt.
What Happens During an Asset Case?
A Chapter 7 bankruptcy case is also referred to as a liquidation case. After your case is filed, a Chapter 7 trustee will be assigned to administer your case. A part of the trustee’s job is to review your schedules, ask you questions under oath at the 341 Hearing and look for assets that he can liquidate to pay your unsecured creditors. The trustee will use a variety of sources for information; however, the main source will be your schedules. If your bankruptcy schedules are complete, accurate and filed correctly, the trustee can gain most of the information he needs from your schedules.
The trustee will review your assets to determine if any of the assets have equity above any liens or exemptions claimed. If the trustee does find assets that have value that are not exempt, he will declare your case to be an asset case. The trustee is interested in assets with equity as those are the assets that he can sell to get money for the unsecured creditors. For example, if your vehicle has a lien that exceeds the value of the vehicle, the trustee will not be interested in this asset as there is no equity for the bankruptcy estate. Likewise, if you claim an asset that is fully covered by your allowable exemptions, the trustee will not want this asset because there is no asset above the allowed exemptions. Almost all assets in a typical case are covered by exemptions and/or have no equity due to liens.
However, if you own a sports car that has no lien and you do not use it as your primary transportation, you may not be able to protect this asset. In that case, the trustee would give you the opportunity to buy the equity from the estate by paying the estate the value of the vehicle. However, in rare cases like these, the debtor agrees to surrender the asset to the bankruptcy estate. At that point, the debtor is basically out of the matter. The trustee will liquidate the asset and use the funds to pay the unsecured creditors.
Not all asset cases are bad for the debtor. In this case, if the debtor owes taxes, this could work to his benefit. Because taxes are non-dischargeable, the debtor would continue to owe the taxes after the bankruptcy filing. However, taxes are priority debts so they receive payment in full of their liens prior to general unsecured debts. Therefore, the tax claims would receive the entire proceeds of the sale of the vehicle up to the amount of the claim.
Contact an Experienced Mount Holly Bankruptcy Attorney
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The Law Office of Travis J. Richards, LLC is a full-service Mount Holly bankruptcy law firm focused on Chapter 7 Bankruptcy, Chapter 13 Bankruptcy, debt consolidation, credit repair, tax liens, student loans and foreclosure. We represent clients in Burlington County and throughout South Jersey.
Contact our office at 609-267-5297 to schedule your free consultation to discuss bankruptcy and non-bankruptcy alternatives. You may also use our convenient online contact form and one of our friendly, professional staff members will contact you to answer your bankruptcy questions and/or schedule a free consultation with Travis J. Richards.
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