The Joy Of A No-Asset Bankruptcy

Posted on: 31 March 2019

When it comes to filing a chapter 7 bankruptcy, things can get confusing. The way you look at your financial situation will change and you will begin to view your belongings and how much money you owe on those belongings quite differently. One area of interest is your assets. When the assets you own are considered safe from seizure, you may have a no-asset bankruptcy. Read on to find out about what it means to have a "no-asset" bankruptcy.

Upside Down Financials

Usually, having a loan almost paid off is a good thing. The way bankruptcy looks at your possessions, however, means that the more you owe the less valuable the asset is to the bankruptcy court. When you declare chapter 7 bankruptcy, you are allowing your entire financial situation to be overtaken by the bankruptcy court. If any assets can be seized, sold, and used to pay off some or all of your creditors, you will end up losing that asset. Assets that still have large balances on the loans, such as real estate and vehicles, are not of interest to the court since they would need to pay off the existing loan before taking any equity from the item. Consequently, the more you own the worse off you can be when you file chapter 7. If you have a lot of property that is paid off (or nearly paid off) you could stand to lose some property with a filing.

Enter Exemptions

Fortunately, even filers that have property holding have another form of help. State and federal bankruptcy exemptions allow consumers to keep things like vehicles, homes, and other personal property. An exemption is a sum that can be deducted from an asset's equity. Here is an example using the state of Ohio:

  1. Real estate in Ohio carries a state exemption of $136,925.
  2. Filers in Ohio can use $3,775 to exempt a vehicle and there is an additional $1,250 wildcard exemption to use on a vehicle or anything else.

If your exemptions are not enough to cover your assets, you can make a deal with the trustee to pay the difference in the exemption and the property. Note that each state has its own exemption rules and amounts so take a look at your state of residence to find out more. Some states, like Texas, have incredibly generous exemptions that allow filers to keep all real estate (up to 10 acres city and 100 acres rural). Most states have exemptions for personal property, work tools, retirement accounts, and more in addition to vehicles and homes.

Finally, it's vital to keep in mind that you must be up-to-date on your payments if you want to keep your home and cars. Bankruptcy cannot stop a creditor from foreclosure or a repossession if you fail to pay your debts. For more information, reach out to a lawyer who focuses on chapter 7 bankruptcy law.


Figuring Out My Finances

For years, I lived on the edge of a paycheck. I was always running out of money, wondering when I would be paid next, and hoping for extra bonuses. Unfortunately, one day my luck ran out, and I found myself without a way to pay my rent. My landlord wasn't patient with me, and I actually got kicked out of my place. It was devastating and embarrassing, but I knew that there had to be a way to repair my finances. I met with a bankruptcy attorney to talk with me about my debts, and she was incredibly helpful. After seven years, I was able to completely correct my credit, and it has changed my life. Check out this blog to learn more about bankruptcy.

Latest Posts