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Could you have a no-asset bankruptcy?

On Behalf of | Jun 13, 2021 | Chapter 7 Bankruptcy

When people are considering Chapter 7 bankruptcy, one of their primary concerns is that they will have to give up things that they need and things that are very important to them. The bankruptcy court will divide their assets into exempt and non-exempt. Those assets that are non-exempt can be sold (liquidated) to help pay their creditors. 

Exempt assets are those that a person can keep. Fortunately, both state and federal bankruptcy laws allow people to exempt assets that are necessities for their life and their work.

What assets are typically exempt?

You can keep your primary home as long as you are not behind on your mortgage and the home is worth more than you owe on it. You can also keep your primary vehicle if the equity in it is within the state’s exemption limit. Tennessee has a wildcard exemption, which lets people exempt up to $10,000 in property that would otherwise be considered nonexempt.  

You can keep any tools or other items you need to do your job, home furnishings, clothing and some jewelry. You can keep any government benefits, spousal and child support, retirement accounts and personal injury lawsuit award.

You may have no assets to liquidate

By the time they file for bankruptcy, many people don’t have anything left beyond these exempt items. They have depleted their bank accounts and sold anything of value to pay their bills. There may be nothing to liquidate.

These are called no-asset bankruptcy cases. Even most of the items in your home, like furniture and some electronics, may have such a low resale value that they aren’t worth liquidating.

Before you dismiss the idea of bankruptcy because you fear you’ll lose things that are valuable to you, it’s wise to learn more about bankruptcy in Tennessee and weigh the pros and cons of filing for bankruptcy vs. continuing down the road you’re on and getting more deeply mired in debt.


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