Can I File A Chapter 7 Bankruptcy If I Have No Assets?

Can I File A Chapter 7 Bankruptcy If I Have No Assets?

A Chapter 7 bankruptcy filing does not require that a bankruptcy debtor own a certain amount of assets measured in dollars to be eligible to file a Chapter 7 bankruptcy case. It does require that prospective debtors complete the means test to determine whether their amount of income qualifies them to file a Chapter 7 bankruptcy case. There is no financial cost to bankruptcy other than the filing fee. However, there may be a cost to waiting to file bankruptcy.

Chapter 7 bankruptcy cases are administered in part by a trustee who works for the Office of the U.S. Trustee, which is part of the Department of Justice. In Chapter 7 cases, the trustee is responsible for selling property that the debtor may not exempt (legally protect), and distributing the proceeds to creditors.

The purpose of this trustee is as follows according to the Department of Justice’s website.

The chapter 7 trustee, as the estate representative for the recovery, preservation, liquidation, and distribution of chapter 7 estates, is a fiduciary responsible to various parties in interest in a case. The goal of the United States Trustee is to establish a system that allows for the complete, economical, equitable and expeditious administration of chapter 7 cases, while allowing the trustee to exercise appropriate business and professional judgment in performing the trustee’s fiduciary duty.

The key point here is that the trustee represents the debtor’s bankruptcy estate to recover, preserve, liquidate, and distribute the property of this estate. Federal law and the trustee’s job requirements in no way require the trustee to assess whether a debtor has some minimum cache of assets to repay some of his or her debts.

It is when the debtor possesses assets, specifically nonexempt assets, that the trustee’s primary functions are applicable. When a Chapter 7 bankruptcy case is filed, debtors may exclude, or “exempt,” certain essential assets from becoming part of their bankruptcy estate. It is the assets in this bankruptcy estate that are liquidated, with the proceeds then distributed by the trustee to creditors. In this situation, the trustee will classify the matter as a “no-asset” case meaning that there is no property available for liquidation, and, therefore, no funds available for distribution to creditors.

If a case contains any non-exempt assets, it will be classified as an “asset” case, which means that there is some property in the debtor’s bankruptcy estate available for liquidation, with the proceeds going to creditors who will receive cents on the dollar for their claims. It is not inconceivable for a Chapter 7 bankruptcy debtor to be able to exempt all of his or her assets in a bankruptcy case. In fact, most Chapter 7 bankruptcy cases are “no-asset” cases.

Theron Morrison and his team of exceptional bankruptcy and collection defense attorneys at the Morrison Law Group are dedicated to assisting any Utah resident with completing the means test and establishing eligibility for filing a Chapter 7 bankruptcy case. We have helped over 8,000 people file bankruptcy and gain a fresh start. Call 801.456.9933 today to schedule a FREE consultation. We have locations in Ogden, Logan, Sandy, and St. George to serve the residents of the counties of Weber, Cache, Salt Lake, Utah, Morgan, Davis, Washington, and surrounding areas.



Theron Morrison

Theron Morrison

Utah’s top bankruptcy and consumer protection attorney.