Should I file for bankruptcy if I have no assets?
The bankruptcy code provides different types of bankruptcy, so if you’re considering bankruptcy, you should know which kind to file. If you want to declare personal bankruptcy, you should figure out the distinction between Chapter 7 and Chapter 13 to determine the right bankruptcy chapter to file under.
Chapter 7 is a shorter bankruptcy process focused on liquidation of the debtor’s non-exempt assets to generate funds that will be used to pay back his or her creditors. Bankruptcy proceedings for Chapter 13, on the other hand, take three to five years of debt reorganization wherein the filer religiously follows a payment plan in order to achieve bankruptcy discharge.
Since Chapter 7 is about liquidating assets, it’s preferred by debtors with few to no assets at all. Not everybody can file bankruptcy under Chapter 7, however. A bankrupt debtor has to pass a means test or be exempted from it to be eligible for a Chapter seven bankruptcy filing.
No-Asset Bankruptcy Petition
The assumption is that Chapter 7 filers hand over their assets for liquidation to their bankruptcy trustee, but this doesn’t happen often. Most Chapter 7 bankruptcy cases are “no-asset.” That’s not to say that the filer literally has no property to speak of. What assets he or she does have are just included in the list of bankruptcy exemptions provided by state law or federal law. Bankruptcy laws ensure that when debtors file for bankruptcy, they have something to help them survive during bankruptcy and build on after bankruptcy.
With no non-exempt property to liquidate, the trustee cannot generate funds to pay off the filer’s debts. This means that in a no-asset bankruptcy case, a creditor often ends up not getting paid. With no actual liquidation going on, most creditors have no chance to collect on what the filer was unable to pay them. On top of this, most debts are also included in the discharge. For this reason, such a bankruptcy filing usually leads to the bankruptcy court notifying them of the situation, indicating that there’s no need for them to file a proof of claim. It’s important to remember, however, that certain debts just cannot be discharged. For instance, child support, taxes, and student loans are not dischargeable.
Bankruptcy Law from State to State
Kentucky has its own list of exemptions. Each state follows its own set of bankruptcy laws, resulting in varying inclusions as well as regulations for bankruptcy exemptions. Kentucky allows its bankrupt debtors to choose between state and federal bankruptcy lists. Some states do the same while others limit their filers to just the state list.
These exemptions generally refer to specific assets, but also allow “wildcard exemptions,” which are monetary values that can be applied to personal property so that it may also be exempted. Besides the automatic stay, the list of exemptions debtors are allowed to claim also reinforces the bankruptcy protection they can actually receive.
Non-Exempt Assets Omission
There are bankruptcy filings wherein the trustee eventually discovers the existence of no-asset chapter seven bankruptcy not included in the bankruptcy information provided in the bankruptcy forms and pertinent documents. In this event, the creditors have to be notified so they can file proofs of claim and collect on these. If the filer is found guilty of deliberately excluding non-exempt property, he or she may face a penalty. It may also affect the status of the bankruptcy case.
It’s really important to be meticulous when filing for bankruptcy. In case a debtor has property that he or she wants to keep, Chapter 13 may be the more fitting solution. Fortunately, passing the means test doesn’t necessarily disqualify a debtor from opting for reorganization.
Want a Solution for Your Financial Problems? Contact a Kentucky Bankruptcy Attorney Today!
If declaring bankruptcy seems to be the answer to your financial distress, it’s best to consult a bankruptcy lawyer. The wise course is to seek legal advice before filing bankruptcy so that you can have the correct guidance and invaluable assistance throughout your entire bankruptcy journey. Bankruptcies can be unpleasant, but bankruptcy lawyers can help their clients work toward the best possible outcome and make the experience less painful.