What is a “No Asset” Chapter 7 Bankruptcy Case?

When you file for bankruptcy protection under chapter 7 of the Bankruptcy Code, you have to tell the court and your trustee about all property you own. You list all “real property” (your home if you own it; your rental property; land, etc.) on Schedule A of your bankruptcy schedules, and all “personal property” (everything else) on Schedule B.

Chapter 7 bankruptcies are also referred to as “liquidation bankruptcies”, and the Code discusses the requirement to “surrender” all this property to your trustee. So does this mean you just lose everything if your file a chapter 7 bankruptcy case?

Thankfully, No!

The reason is that if you’re filing a bankruptcy with the Bankruptcy Court in Denver, Colorado, you’re either going to claim Colorado state “exemptions” or Federal Bankruptcy or non-bankruptcy exemptions on Schedule C of your chapter 7 bankruptcy filing. Each of the exemptions given to Denver-area residents and others throughout Colorado by the state legislature or U.S. Congress is worthy of its own discussion, but in summary, these exemption laws keep the trustee of your bankruptcy case from taking your property.

So How Do I Know Which Exemptions to Claim?

Nothing personal, but unless you are a Colorado attorney who regularly practices bankruptcy law, you probably won’t know which exemptions you can claim (or which you can’t), where in the Colorado Revised Statutes or U.S. Code the exemption laws can be found, and the effect of each on the property you own when you filed. That’s okay! Leave it to a competent and experienced Denver bankruptcy attorney  to utilize these laws for you, and properly complete Schedules A, B and C of your bankruptcy filing. A smart lawyer will be able to analyze the effect of a bankruptcy filing on the property you own, advise you on what steps you can take to keep your property (or properly dispose of or use it before filing), and plan the bankruptcy filing to protect as much of your assets as possible.

What a “No Asset” Case Looks Like

If your lawyer is careful in guiding you through the pre-bankrupty process, and in properly planning your bankruptcy with you, your chances of having a “No Asset” chapter 7 will be greatly increased. A No Asset case is one where NOTHING of the debtor’s is taken by the trustee to pay creditors. This has many advantages over an Asset Case, in addition to the obvious benefit of keeping all of your stuff:

a) More likely possibility of a shorter and cleaner Meeting of Creditors

b) Little 0r no additional work to do after your meeting, since the trustee understands he or she isn’t getting anything

c) A closing of your bankruptcy case as soon as four months after filing

But to have the greatest chance at having your case treated as a No Asset case by your trustee, it’s crucial to work with the right lawyer. Make sure the attorney you’re considering hiring understands both how the Colorado state and Federal exemption laws will apply to the things you own, as well as the quirks of each of the 12 – 15 trustees working in Denver. Sometimes even the best chapter 7 cases will be asset cases (a possible reason to file chapter 13 in the first instance), but an intelligent and creative lawyer will do everything he can to keep your money in your pocket and your stuff in your home.

Andrew Trexler is a Denver area Bankruptcy Attorney