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Wednesday, December 20, 2017

What Is a No-Asset Bankruptcy?

When an individual petitions the court for a bankruptcy filing under chapter 7, that individual gives an impartial bankruptcy trustee the right to take possession of his or her assets. Those assets are subsequently sold off and the proceeds distributed among the petitioner’s creditors. This is an attempt to fairly compensate those creditors before discharging the balance of petitioner’s debts. State and federal laws allow bankruptcy petitioners to exempt their personal possessions up to a certain value from collection and sale. If a petitioner exempts an asset, it will continue to belong to the petitioner even after the bankruptcy is completed and the debts of the petitioner are discharged. This allows people going through bankruptcy to keep assets like automobiles, family heirlooms, tools necessary to make a living, clothing, retirement plans, and even a reasonable amount of liquid money.

The reason petitioners are permitted to exempt a certain number of assets is because it would be nearly impossible for a person to sustain him or herself with no assets and poor credit. Even if a person spends responsibly after a bankruptcy, the petitioner will be in perpetual dire straits if he or she is left with nothing. Such petitioners would be forced to rely on public assistance and become a burden to the state. Basic human decency dictates that a petitioner be permitted to keep property with significant sentimental value. It is important that public policy allow bankruptcy petitioners the ability to keep some of the assets in their possession after their bankruptcy is concluded. The limits of the exemptions and the laws surrounding them vary significantly from state to state. Consult with a local attorney to determine which exemptions exist in your state.

The petitioner will be asked to account for all of his or her assets and assign exemptions as desired. If the petitioner can exempt all of his or her personal property, the bankruptcy trustee may not sell any of the assets belonging to that petitioner. This is referred to as a no-asset bankruptcy. This is extremely common. The majority of chapter 7 bankruptcies are no-asset bankruptcies. In these cases, creditors receive nothing before the debts they hold are discharged.


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Serving Southeastern Wisconsin, with offices in Milwaukee and West Bend, Affliated Attorneys, LLC represent clients throughout Milwaukee County, Washington County, Waukesha County, Dodge County, Ozaukee County, Racine County, Sheboygan County, Jefferson County, Fond du Lac County and Walworth County.



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