In broad terms, there are two types of Chapter 7 bankruptcy case: “asset” and “no asset”.
Most Chapter 7 filers have no asset cases. What that means is their assets, i.e. personal belongings and real estate, are exempt (protected) under the bankruptcy rules. Practically speaking, in a no asset case there isn’t anything for the bankruptcy trustee to liquidate.
The bankruptcy court will close a no asset case about four weeks after a discharge enters.
In an asset case, there are non-exempt (unprotected) assets that the trustee can liquidate to pay the creditors’ claims. In Colorado, the most common non-exempt asset is tax refunds. Toward the end of the year and the beginning of the year, the trustees will be on the look out for cases where the filer is expecting to get a tax refund. Another common non-exempt asset in Colorado is firearms.
If a trustee wants to liquidate any non-exempt assets, he or she will also want the filer to turn over 25% of the net amount of any wages the filer was due on the date his bankruptcy was filed, as well as 25% of any funds (cash or bank deposits) from wages the filer has on the date his bankruptcy was filed. Both of these items are also non-exempt. In most cases, the trustee will only be interested in wages if the filer has other non-exempt assets that he or she can liquidate.
An asset case will stay open until the trustee liquidates any non-exempt assets and distributes those funds to creditors. There isn’t any time constraint on liquidating assets, and the trustee can keep a case open for many months.
Filers in asset cases and a no asset cases will get their discharge at the same time, approximately 60 days after their meeting with the trustee (also known as the creditors meeting or 341 hearing).
It’s important to determine before you even file whether or not you have an asset or a no asset case. You should rely on an experienced bankruptcy lawyer to tell you whether you have any non-exempt assets. If you do, you and your lawyer can create a strategy for dealing with them. We would love to help guide you through the bankruptcy process. Call us at 303.331.3403.
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