When you file a chapter 7 bankruptcy you must turn over all your non-exempt property to the trustee who then distributes your property to your creditors. But in almost all of the cases, I file I try and make sure all of my client’s property exempt before filing.
Since all the property is exempt my clients generally do not lose any property in bankruptcy.
These cases are called “no asset” cases. The client does have assets but the trustee takes no assets because they are all exempt.
You want your case to be a no-asset case. I will make every effort to ensure that it is a no-asset case.
WHAT HAPPENS IF YOU HAVE AN “ASSET CASE”?
Although the vast majority of the cases I file are “no Asset Cases” a small number are “Asset Cases”. Let me give you an example of an Asset Case.
Let’s assume that because you have a large amount of equity in your home we must use the 704 exemptions. Under those exemptions, the vehicle exemption is only $2,725. And there is no “wild card” exemption. Let’s assume that. according to Blue Book, your car is worth $4,757 and you own the car free and clear.
$2,725 of the value of the car would be exempt.
The balance of the value ($2,032)is not exempt. The trustee would take the car from you , sell it, give you $2,725 and give the rest of the money from the sale to the creditors (after deducting something for himself).
You do have the option of buying the non-exempt portion ($2,032) from the trustee. Ordinarily, you can make monthly payments to the trustee. We might be able to negotiate a lower purchase price by pointing out that if he were to sell the car at auction he would have to pay an auction fee. We should be able to deduct this amount.
An alternative approach would be for you to sell the car before you file for bankruptcy. But you would need to spend the money from the sale before you file bankruptcy or else the money would be an asset you would lose in the bankruptcy.
Keep in mind that this example only applies where you are using the 704 exemptions due to the fact that you have a large amount of equity in your home.
If you don’t have a large amount of equity in your home you use the 703 exemptions. Under the 703 exemptions, the vehicle exemption is $3,525. Plus there is a large wild card exemption ($23,250)