What Is a “Zero Asset” Bankruptcy?
Jan. 31, 2022
If you are considering bankruptcy and have come across the term "zero-asset bankruptcy," you may be wondering what it means. Put simply, it means that the person who filed has no non-exempt assets to sell off and can keep everything they own. Read on to learn more.
Most Chapter 7 Bankruptcies Are Zero Asset Cases
In Chapter 7 bankruptcy, the court (more specifically, the bankruptcy trustee)has the right to sell off your non-exempt assets to pay your creditors. For example, if you owned a home outright, it is likely that the trustee would sell your home if you filed for Chapter 7. That said, 90% of Chapter 7 bankruptcies involve zero assets. In these zero asset cases, the bankruptcy court has nothing to sell and simply “wipes out” your debts while your creditors get nothing.
Understanding How Equity Is Calculated
The next natural question is, “But how is it that all these people have no assets?” Yes, the majority of clients at our St. Louis bankruptcy law firm own homes, cars, furniture, etc. Each state allows individuals to protect certain values in property. For example, in Missouri, we can exempt $15,000 in real estate equity, $3,000 in vehicle equity, $3,000 for furniture/clothes/electronics etc. In addition to these amounts, there are catch all exemptions that can be used to protect assets (more about this below). This is the most important reason why talking to a bankruptcy lawyer makes sense. Within just a few minutes, our firm can tell you whether your primary assets are protected from the Trustee in a Chapter 7.
Using Bankruptcy Exemptions
As mentioned above, the law allows you to exempt a certain amount of your property from your bankruptcy estate. In Missouri, you must live in the state for 2 years in order to claim our state's bankruptcy exemptions (otherwise, you'll claim the exempted amount from your previous state of residence). Missouri allows you to exempt (or keep):
your Covid-19 stimulus checks, retirement accounts, wrongful death awards, and health savings accounts
$15,000 worth of equity in your primary residence
$3,000 worth of equity in your vehicle
$3,000 worth of personal property (clothes, furniture)
$500 worth of jewelry (plus an additional $1,500 for a wedding ring)
$1,500 worth of firearms and ammunition
$3,000 worth of work equipment/tools
$600 (a “wildcard exemption” you can apply towards anything)
$1250 plus $350 for every dependent in your household under the age of 21
These funds can be used to protect bank account balances and other assets.
The Chapter 13 Option
What if your car is paid off and worth $8,000? What if you have $50,000 of equity in your home? Please contact us so we can see if Chapter 13 bankruptcy is a good fit for you. Chapter 13 involves creating a debt repayment and consolidation plan through the court. The benefit of a Chapter 13 in these circumstances is that the Court cannot sell any assets. Rather than take a risk on an asset, it may make sense to get into a reasonable payment plan with the Court and still discharge your debt.
Call Us Today to Speak to a St. Louis Bankruptcy Attorney
At AKS Law, we are dedicated to helping consumers like you get a fresh start through bankruptcy. To find out more about a zero asset bankruptcy, Chapter 13, or anything else bankruptcy-related, call us at 314-740-2989 or complete this contact form.