Attorney Deanne Koll explains what a “no asset” bankruptcy is and what it means to a lender.

Disclaimer: This video is designed to be educational and informative, but it is not legal advice. Collection law is constantly evolving and subject to change. Each situation is unique, and each case should be addressed to fit the unique situation.

If your customer filed for Chapter 7 bankruptcy protection, you may—at some point—receive a notice from the bankruptcy court saying that the bankruptcy is a “no asset” case. What does that mean? In Chapter 7 bankruptcies, the appointed trustee must determine whether there are assets of the debtor that would be available for distribution to creditors.

In other words, the trustee has to review the assets disclosed by the debtor and determine if any of those assets are not “exempt” assets and thus can be taken by the trustee to satisfy creditors.

The vast majority of Chapter 7 bankruptcies are “no asset” bankruptcies. Meaning, the debtor has no assets which are available for distribution to creditors. Exempt assets are not available for distribution.

In Wisconsin, an individual may exempt personal bank account cash up to $5,000 and home equity up to $75,000 (or $150,000 if a couple). Those exempt assets are not available to be taken and sold by the trustee.

When you receive notice that a bankruptcy is a “no asset” bankruptcy, you know that you need not file a Proof of Claim, since there are no assets that will be sold to pay unsecured creditors.

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