Cost of Bankruptcy with No Assets: How Consumers Can Get Cheap and Affordable Chapter 7 Bankruptcy
Many financial experts and analysts have frequently argued that the cost of bankruptcy without assets should be very low so that most consumers can file for bankruptcy cheaply and affordably. economic conditions and the rising cost of bankruptcy like today, which argue that the cost of routine bankruptcy should be a cheap and low-cost affair, is based on the argument that an overwhelming majority of personal bankruptcy cases , particularly the Chapter 7 types, are simply cases of “no assets” or “minimal assets.” This is defined as a bankruptcy case of the type where the debtor owing the debts literally has and owns absolutely NOTHING: any money or property of the kind, value, or value that creditors may claim or seize from the debtor under the law. , if the debtor does not pay them (regardless of the fact that the debtor does not have the money to pay the large lawyer’s fees).
The basic argument of these bankruptcy experts and professionals, including law professors, lawyers, trustees, and judges, who make this point, is that such no-asset cases are routine, simple, and straightforward, in the sense that they do not require anything complex but just simple routine paperwork by the debtor or an assistant to prepare the debtor’s bankruptcy case for the court and to do the processing of the case. And second, that in such cases, creditors generally do not offer to contest or contest the case once they realize that the debtor’s bankruptcy petition is in fact a no-asset case because they cannot win or collect anything in any way. way to do it. Therefore, they generally argue, the cost of bankruptcy without assets must be very low, cheap and more affordable. Furthermore, the same argument is used by those who say that such cases do not really need the services of an attorney to handle them since, they say, such bankruptcy cases are generally too simple, elementary, and largely administrative for one to pursue. cape.
THE BASIC TYPES OF BANKRUPTCY CASES
There are, of course, basically two types of PERSONAL bankruptcy cases provided for in the US Bankruptcy Code: the Chapter 7 and Chapter 13 types. These designations are derived from the names of the Code chapters that describe them. A brief description of each of these:
CHAPTER 7. Often referred to as a “liquidation” bankruptcy, this type of bankruptcy is primarily a court-supervised orderly proceeding in which a court-appointed “trustee” takes over the assets of the debtor’s estate (to the extent that he or she or she has any, if all), “liquidates” or reduces them to cash, and makes distributions of said recovered funds to creditors. The debtor is allowed to keep certain “exempt property” that will allow the debtor to live even after the bankruptcy. In practice, however, there is usually little or no non-exempt property left in most chapter 7 cases, and therefore there is usually NO actual “liquidation” of the debtor’s assets in the average case. These cases are called “cases without assets.”
CHAPTER 13. This is often called a “debt adjustment” bankruptcy for a person with a regular income. This type of bankruptcy is designed for an individual debtor who has a regular source of income. Chapter 13 is generally preferred to Chapter 7 by debtors who have some valuable asset they need to keep, such as a home, because this type of bankruptcy allows the debtor to propose a “plan” to pay off their debts to creditors over the course of time. time, usually three to five years. Chapter 13 is also used by consumer debtors who do not qualify for Chapter 7 relief because they do not meet the “means test” requirements. Basically, in a Chapter 13 case, the debtor draws up a court-approved “payment plan” whereby he or she then pays off the debt, in whole or in part.
What property can you keep in bankruptcy?
In Chapter 7 cases, which is the one that typically involves limited or no assets, the vast majority of debtors who file keep all of their assets. (The basic principle of the Bankruptcy Code or law, aims to give the debtor a fresh start, not punish him).
The following property may be exempt under Section 522 of the US Bankruptcy Code (11 USC 522):
has. Housing up to $17,425.00 in equity;
b. Disability or unemployment benefits;
against Life insurance policy with loan value up to $9300.00;
d, Alimony and alimony;
me. Most pensions and some IRAs (401K plans) are also protected and, under New Jersey law, are not even part of the bankruptcy estate. Evans v. Evans, 2001 WL 1711048 [N.J. Super. Ch.]. Qualified IRAs are also excluded from the bankruptcy estate. Yuhas v. Orr, 104 F.3d 612 [1997]);
F. Personal items such as clothing, appliances, books, furniture, household items, and musical instruments up to $450.00 per item, not to exceed a total of $9,300.00;
gram. Jewelry up to $1150.00;
H. Motor vehicles up to $2775.00;
Yo. personal injury recoveries to $17,425;
d. Additional personal injury recoveries if it is compensation for lost future earnings. In the Matter of R. Scotti, 245 BR 17 (2000);
k. Other payments in compensation for loss of future earnings;
I. Workers’ compensation benefits. Evans v. Casarow, 29 BR 336 (1983);
Mr. Wrongful death recoveries for a person you depend on;
not. Public benefits including unemployment, social security, public assistance, veteran’s benefits, and crime victim’s compensation;
Y. Trade tools up to $1750.00;
p. Wild card exemption up to $9,650.00 of any property. It can be used only to the extent that a home is not exempt. For example, suppose a debtor owns no real estate and has a car worth $10,000 and a diamond ring of equivalent value. The ring or the car (any item or items totaling NO more than $9,650.00) may be retained, but not both.
After filing a case with no assets
Is that how it works. Basically, once you file for bankruptcy, a court-appointed officer called a trustee will be assigned to your case. The trustee will first review the trustee’s assets and determine if they fall into the category called “exempt” or “non-exempt.” Non-exempt assets (if owned by a debtor) are the type that will be sold and the proceeds used to pay off your creditors. While exempt assets, on the other hand, are the type that will remain yours.
Therefore, if your case has non-exempt assets, your creditors can file a claim for distribution and the trustee in the case can distribute those assets. However, if the trustee otherwise determines that all of his assets are exempt, then he will file a “no assets” report with the court.
As a general rule, most Chapter 7 bankruptcy cases are no-asset cases.
Why Chapter 7 Cases Are Ripe for Low Cost or Do-It-Yourself Bankruptcy
In effect, what this means is that when you have a case with no assets, which means the kind of case that makes up 80 to 90 percent of Chapter 7 bankruptcy cases, all you need is basically is for the trustee in the case to make his or her determination that it is a no-assets case, and to file his or her “no-assets” report with the court. And the case is almost practically finished, since practically no creditors will challenge it or file claims against the debtor’s case or his release from debt obligations. The debtor (that is, usually the attorney they will have retained to handle their case) simply has to fill out the usual litany of routine forms and documents and “file” them with the bankruptcy court for processing. And that’s it! In other words, the case is simply a relatively simple administrative matter that basically involves completing simple routine forms and submitting them to the local bankruptcy court.
Therefore, according to analysts who have studied the bankruptcy system and are of this opinion, in light of the apparent simplicity involved in carrying out this type of operation, the cost of bankruptcy without lawyers’ assets should be very low, and it should be such that consumers can get cheap and affordable Chapter 7 Bankruptcy.
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