How to File a Chapter 7 Bankruptcy No Asset Case

Chapter 7 bankruptcy, also known as a no asset case, allows a debtor to liquidate most of his unsecured debt. Chapter 7 bankruptcy is ideal of debtors will few assets or whose assets have little or no equity.

Who Can File Chapter 7?

Any individual who resides, is domiciled, or has business property in the U.S. may file a Chapter bankruptcy. To file a Chapter 7 bankruptcy, a debtor must pass the median income and means tests. If a debtor does not pass either of these tests, he must file a Chapter 13 case. Note, however, that non-consumer debts are not subject to the median income and means tests. Moreover, disabled veterans are not subject to the means tests.

The Chapter 7 Process

All Chapter 7 debtors must complete pre-bankruptcy counseling no more than 180 days before they file bankruptcy. A Chapter 7 case is initiated by the filing of the bankruptcy petition and schedules. A Chapter 7 debtor must also file copies of his paystubs or payment advices for the 60 day period immediately prior to the bankruptcy. Additionally, a Chapter 7 debtor must provide a copy of his most recent tax return to the bankruptcy trustee at least seven days before the meeting of creditors.

After the bankruptcy petition has been filed, the Meeting of Creditors will be scheduled. The Meeting of Creditors usually takes place about thirty days after the bankruptcy petition. All Chapter 7 debtors must prove their identity by presenting a government issued photo identification and proof of their social security number. At the Meeting of Creditors, the debtor will be sworn in and questioned by the bankruptcy trustee about his financial situation and the contents of his bankruptcy petition and schedules.

Unless the bankruptcy trustee determines that the debtor has assets which can be liquidated to pay the debtor’s unsecured creditors, he will abandon his interest in the debtor’s property and recommend the debtor receive a discharge. Chapter 7 cases are usually discharged within about 90 days of the date they are filed. However, in order to receive a discharge, Chapter 7 debtors must complete pre-discharge counseling.

What about Secured Debt?

If a Chapter 7 debtor is current on secured debts, he will generally be allowed to retain the property which secures those debts as long as he continues making voluntary payments. If he is behind on secured debts, he has three options:

Redemption;
Reaffirmation; or
Surrender.

Getting Legal Help

As a result of passage of legislation making it necessary for Chapter 7 debtors to pass the median income and means tests, filing Chapter 7 bankruptcy has become more complex. An experienced bankruptcy attorney can review your financial situation and advise you of whether you qualify to file a Chapter 7 case.

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