The Cassidy Law Firm Blog

Tuesday, May 20, 2014

What Is an Asset Case in Monmouth County?

Once the decision to file for bankruptcy has been made, you must decide which bankruptcy chapter to use to file your bankruptcy case. Most individuals (and married couples) use chapter 13 or chapter 7. A corporation filing for bankruptcy typically uses wither chapter 11 or chapter 7. In a chapter 13 bankruptcy the debtor is required to develop a repayment plan to repay the majority of debts over an extended period of time. In a chapter 7 bankruptcy, most debts are discharged, or eliminated with the need to repay them. Non-exempt assets, however, in a chapter 7 bankruptcy can be seized and sold by the bankruptcy trustee and the proceeds used to repay creditors. For this reason, most debtors filing a chapter 7 bankruptcy have few, if any, non-exempt assets. When assets are available to be sold the case is referred to as an “ asset case ”.

Although bankruptcy is a creature of federal law, and therefore falls under the jurisdiction of the federal court system in the United States, the exemptions available to a debtor is determined by state law. The U.S. Bankruptcy Code does provide a set of federal exemptions; however, the individual states may also provide a set of exemptions. Furthermore, state law determines if you are required to use the federal exemptions, the state exemptions, or may choose between the two. In New Jersey, a debtor may use the federal exemptions or the state exemptions but in no case can the two sets of exemptions be combined.

In a chapter 7 bankruptcy in Monmouth County, assets that are not protected by an exemption can be seized by the bankruptcy trustee. The trustee is appointed by the court to oversee your bankruptcy case. The trustee has the authority to take possession of an asset and sell the asset. Proceeds are then divided among creditors by the trustee according to the priority of claims.

Most creditors who have valuable non-exempt assets to protect elect to use a chapter 13 bankruptcy. Because creditors are repaid in a chapter 13 bankruptcy, non-exempt assets are not at risk of being sold. If, however, a debtor does not realistically have the means to repay debts during the required chapter 13 repayment plan, a chapter 7 may be the only option. In that case, the chapter 7 case will be considered an “asset case”.

If you have questions about asset case in Monmouth County and the bankruptcy process in general, contact an experienced Monmouth County bankruptcy attorney to make an appointment.

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