What Is a No-Asset Bankruptcy?

 Posted on October 18, 2021 in Chapter 7 bankruptcy

People who are struggling to repay the debts they owe while also addressing their regular expenses and daily needs have a number of options for debt relief, including filing for bankruptcy. However, some people may be worried that if they file for bankruptcy, they will lose certain assets, such as their home, their vehicles, money saved in a bank account, or other personal property. Fortunately, many debtors can qualify for a no-asset bankruptcy in which they will not be required to turn over any property. By working with a skilled and experienced bankruptcy attorney, a person can determine whether this type of bankruptcy is available to them.

Assets Exempt From Liquidation in Chapter 7 Bankruptcy

A debtor may file for Chapter 7 bankruptcy, which will allow their unsecured debts to be discharged once the bankruptcy process is completed. This type of bankruptcy is often known as a “liquidation bankruptcy,” since some debtors will be required to turn over certain assets, which will be liquidated so that creditors can receive payment for some of the debts that are owed. However, in a no-asset Chapter 7 bankruptcy, a debtor will not be required to turn over any assets.

If a case is a no-asset bankruptcy, it does not mean that the debtor does not own any assets. Instead, it means that exemptions to liquidation will apply for all of the assets a debtor owns. Property that is exempt will not need to be turned over, and a person will be able to maintain ownership of these assets after the bankruptcy is complete. 

In Texas, multiple types of exemptions apply in Chapter 7 bankruptcy cases, including:

• Homestead exemption - The full amount of equity that a debtor owns in their family home may be exempt from liquidation. These exemptions will apply for up to 10 acres of property in urban areas or 200 acres in rural areas. If a homeowner will be able to continue making mortgage payments after filing for bankruptcy, they will usually be able to keep their home.

• Motor vehicle exemption - One vehicle may be exempted from liquidation for each member of a family who holds a driver’s license or relies on someone else to provide them with transportation.

• Personal property exemptions - Exempt property includes furniture, clothing, food and other consumables, bicycles and other sporting equipment, tools or equipment a person uses as part of their trade or profession, pets, and two firearms. These exemptions apply for personal property with a total of $100,000 or less for a family or $50,000 or less for a single person.

• Wage exemptions - The income a person earns, including any child support or spousal support payments they receive, are exempt from liquidation, and these amounts are not included when calculating the total value of personal property.

• Retirement account/pension exemptions - Retirement savings plans provided through an employer and individual retirement accounts, including 401Ks and IRAs, are exempt from liquidation. Pension benefits are also exempt.

Contact Our Boerne No-Asset Bankruptcy Attorney

If you are considering bankruptcy, Law Offices of Chance M. McGhee can help you understand whether your assets may be exempt from liquidation, and we will advise you on the best steps you can take to receive relief from your debts while avoiding financial difficulties. Contact our New Braunfels Chapter 7 bankruptcy lawyer today at 210-342-3400 to arrange a free consultation and learn more about your options.

Sources:

https://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-7-bankruptcy-basics

https://statutes.capitol.texas.gov/Docs/PR/htm/PR.41.htm

https://statutes.capitol.texas.gov/Docs/PR/htm/PR.42.htm