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What is a Chapter 7 "no asset" case?

Any of our Escondido readers who are familiar with previous posts here know that Chapter 7 bankruptcy can be an excellent debt solution when all other options just don't seem right. This type of personal bankruptcy is known as "liquidation" bankruptcy, because the filer is supposed to list all of their assets, which are then sold and the proceeds applied toward outstanding debt. But what if a bankruptcy filer doesn't have any assets? Or, what if all of the filer's assets fall under the wide range of bankruptcy exemptions?

If this is the case, the bankruptcy filing is what is called a "no asset" case. In fact, the majority of personal Chapter 7 bankruptcy filings are no asset cases. When an Escondido resident begins the bankruptcy process there needs to be a determination of whether or not the filer has any assets that would be subject to liquidation. If there are none, the bankruptcy trustee will file what a document called a "no asset" report.

In "no asset" cases the entire bankruptcy process can be over rather quickly. When there are no assets, there is no need for lenders to file a proof of claim form with the court, as there will be no proceeds to apply toward the debt anyways. This can speed things up considerably.

Obviously, there is a great deal of appeal in having a no asset case upon filing for Chapter 7 bankruptcy. However, the key is to make sure that assets are classified correctly if they are exempt from the bankruptcy process. If non-exempt assets are uncovered during the process, things could bog down as creditors will want to put in a claim to ensure that they get at least some of the proceeds from the sale of those non-exempt assets.

Source:, "Liquidation Under the Bankruptcy Code," Accessed on Jan. 17, 2015

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